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In order to strengthen the taxation management of enterprises and individuals (hereinafter referred to as contractors) who come to China to contract to the operation of offshore and onshore foreign cooperative oilfield projects or provide labor services (hereinafter referred to as contracting to oil engineering operation or providing labor services) and ensure implementation of the state Tax Law, we hereby notify you of the following matters concerning tax payment by contractors in accordance with the stipulations of the Law of the People's Republic of China on Tax Collection and Management (hereinafter referred to the Law on Tax Collection and Management) and its Detailed Rules for Implementation: I. A contractor who has income gained from contracting to oil engineering operation on land and sea areas or providing labor services shall pay various taxes in accordance with China's Tax Law and related regulations. The enterprise with foreign investment is responsible for withholding the individual income tax of its employees. II. A contractor who comes to China to contract oil engineering operation or provide labor services shall go to perform taxation registration with the competent tax authorities in accordance the related stipulations of the Law on Tax Collection and Management and declare tax payment according to law. III. The company (hereinafter referred to as the contractee), which signs a contract with the contractor who undertakes to engage in oil engineering operation or provide labor services, shall, within 15 days after the signing of the contract, submit a written report on related information, including the name of the contractor, the contracted project, contracted cost, the period of the contract, the work place as well as the name, address and telephone number of the responsible member, to the competent tax authorities. The contractee mentioned in the text includes state-owned enterprise, enterprise with foreign investment and foreign enterprise. IV. A contractor who has not received a business license shall, in accordance with the stipulations of Article 42 of the Detailed Rules for Implementation of the Law on Tax Collection and Management, hand in tax margin to the tax authorities. (1) The contractor's tax margin shall be withheld by the contractee. (2) The contractee, when paying the operational funds to the contractor each time, shall withhold 12 percent cost of the total sum of money paid which is to be used as the contractor's tax margin and, in the current month when the money is withheld, transfer the money into the contractor's account of the tax margin bank designated by the tax authorities in charge of the contractor. The competent tax authorities shall issue a "tax margin collection receipt" to the contractor in light of the bank's transfer certificate. (3) After the contractor who has handed in tax margin and has performed the declaration procedures in accordance with the stipulations of the Tax Law, the competent tax authorities may deduct the payable tax from his margin. If there is still surplus of margin after clearing off the tax payments, the competent tax authorities shall return the surplus margin to the contractor and at the same time take back the "tax margin collection receipt". (4) If, in three months after the termination of the contract for undertaking oil engineering operation or providing labor service or after payment of the last sum of operational funds, the contractor still has not declared tax payment, the competent tax authorities may, within five days after expiration, put the full amount of the tax margin as payable tax into the treasury. The duty-paid proof of the contractor shall be stored temporarily in the competent tax authorities and be received later. (5) Contractor to whom tax margin is introduced is no longer required to implement the stipulations concerning the withholding of tax payment as set in Article 34 of the Detailed Rules for Implementation of the Provisional Regulations of the People's Republic of China Concerning Value-Added Tax and Clause (1) of Article 29 of the Detailed Rules for Implementation of the Provisional Regulations of the People's Republic of China on Business Tax. (6) Contractor with guarantor for tax payment in China, after his application is examined and approved by the competent tax authorities, may be exempt from paying tax margin. The tax payment guarantor stated here must be tax payment guarantor with the guarantor qualifications as stipulated in Clause 2, Article 44 of the Detailed Rules for Implementation of the Law of the People's Republic of China on the Tax Collection and Management confirmed by competent tax authorities. (7) The competent tax authorities may issue a certificate of exemption from withholding tax margin to the contractor who has received a business license or has provided tax payment guarantor, in light of this certificate, the contractee shall grant the contractor exemption from withholding. If the contractor does not hold the certificate of exemption from withholding tax margin which is issued by the competent tax authorities, the contractee must withhold the tax payment margin issued by the competent tax authorities. V. If tax payment is evaded by the contractor resulted from the violation by the contractee of the stipulations of Clauses (1), (2) and (7) of Articles 3 and 4 of this Circular, the relevant contracting expenses shall not be itemized when calculating enterprise income tax. This Circular goes into effect from the day of the delivery of the text, the original documents of the State Administration of Taxation Coded Guo Shui You Zi (89) No. 003 and that Coded Guo Shui Han Fa [1990] No. 1069 shall be simultaneously annulled. |
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