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In order to implement the Notice of the State Administration of Taxation and the State Administration of Foreign Exchange on Strengthening Taxation on Income of Foreign Shipping Companies and Control over Overseas Payments in International Marine Transportation (Guoshuifa No. 139 [2001], hereinafter referred to "the Notice"), the following Supplementary Notice is hereby issued on relevant questions concerning taxation on income of foreign shipping companies and control over overseas payments in International marine transportation: กก I. Procedures for applying for tax exemption treatment (1) Eligibility for tax exemption The "taxpayers qualified to tax exemption on their income from international marine transportation" in Article 4 of the Notice refer to foreign companies stipulated in the bilateral agreements signed between China and other States on the avoidance of double taxation, the agreements on mutual tax exemption on income of marine transportation enterprises from international marine transportation, the agreements on marine transportation and other treaties or exchange of documents (hereinafter referred to "Agreements or Treaties". See the attached List of Tax Exemption or Reduction on Income from International Marine Transportation) and residing in a State (region) which has concluded the Agreements or Treaties with China. Their income, excluding the commissions of the shipping agent companies, from international marine transportation freights or from the affiliated businesses defined in the Notice of the State Administration of Taxation on the Interpretation of the Regulations in Taxation Agreements Concerning International Transportation (Guoshuihan No. 241 [1998]) are exempted from taxation. (2) Procedures for obtaining the tax exemption status A foreign company may apply for exemption of enterprise income tax and/or business tax in accordance with Article 4 of the Notice by itself or through the company that has the statutory obligation to make tax declaration and pay taxes in the name of the foreign company. No matter how many shipping lines the foreign company operates, the approval procedure will be a one-stop procedure as follows: 1. The applicant may choose as the one-stop approval authority the Administration of State Taxes in charge of administration of income tax of foreign-invested enterprises in the locality where it does business. It applies to this Administration of State Taxes for the Tax Exemption Qualification Certificate for Tax Exemption on Income of Foreign Companies from International Marine Transportation (hereinafter referred to the "Income Tax Exemption Certificate") issued by the State Administration of Taxation of the P.R. China. In case the application is filed through the company that has the statutory obligation to make tax declaration and pay taxes in the name of the foreign company, a power of attorney should be provided by the taxpayer. The one-stop approval authority shall, upon receiving the application from the applicant for the Income Tax Exemption Certificate, review carefully the legal supportive documents such as the Resident Certificate. It shall issue in a timely way in the name of the applicant the Income Tax Exemption Certificate provided that the application is made in accordance with provisions in the Agreements or Treaties concerning tax exemption on income from international marine transportation. It shall then note down in the Resident Certificate by stamping "Tax Exemption Certificate Issued" and keep the original Resident Certificate for record. The applicant shall keep a copy of the Resident Certificate and of other supportive documents for use at the Administration of Local Taxes in the same locality or at the Administration of State Taxes in other localities. The Administration of State Taxes that issues the Income Tax Exemption Certificate shall note down at the bottom of the Certificate the person in charge of the issuance and his telephone number and report the application file of the foreign company to the provincial Administration of State Taxes which will in turn report it to the State Administration of Taxation. 2. If the income of the applicant from international marine transportation is also qualified for exemption of business tax, the applicant shall provide the Income Tax Exemption Certificate, copies of the Resident Certificate and other supportive documents to the Administration of Local Taxes in the region or the city where the one-stop approval authority is located, in order to apply for the Business Tax Exemption Qualification Certificate for Business Tax Exemption on Income of Foreign Companies from International Marine Transportation (hereinafter referred to "the Business Tax Exemption Certificate") issued by the State Administration of Taxation of the P.R. China. The Administration of Local Taxes shall, upon receiving the application from the applicant for the Business Tax Exemption Certificate, carefully review the qualification of the applicant in accordance with the relevant Agreements or Treaties between China and other States or regions. It shall issue in a timely way in the name of the applicant the Business Tax Exemption Certificate provided that the application is made in accordance with the provisions in the Agreements or Treaties concerning the exemption of business tax on income from international marine transportation. It shall then note down in the copies of the Resident Certificate by stamping "Business Tax Exemption Certificate Issued" and shall keep one copy of the Resident Certificate for record. The applicant shall keep copies of the Resident Certificate and of other supportive documents for use at the Administration of Local Taxes in other localities. The Administration of Local Taxes that issues the Business Tax Exemption Certificate shall note down at the bottom of the Certificate the person in charge of the issuance and his telephone number and report the application file of the foreign company to the provincial Administration of Local Taxes which will in turn report to the State Administration of Taxation. 3. For an applicant that operates more than one shipping lines, it may also apply for tax exemption on its freight income at the Administration of State Taxes or the Administration of Local Taxes at other localities where it has business by providing copies of its Income Tax Exemption Certificate issued by the one-stop tax authority and/or of its Business Tax Exemption Certificate issued by the Administration of Local Taxes at the same locality of the one-stop approval authority and its Resident Certificate as well as other supportive documents. The Administration of State Taxes and/or the Administration of Local Taxes at other regions or cities shall, upon receiving the application, stamp and date on the copies of the Income Tax Exemption Certificate and/or the Business Tax Exemption Certificate and keep for archivist purposes a copy of the Certificate(s) and of the Resident Certificate and other supportive document of the taxpayer. Unless there is special need, the Administration of Local Taxes at the place where the one-stop approval authority is located and the Administration of State taxes and/or the Administration of Local Taxes in other localities will not review the original Resident Certificate or other supportive documents of the taxpayer. (3) Resident Certificates For purpose of applying for tax exemption on income from international marine transportation in accordance with the Agreements or Treaties, a foreign company from different States may provide any of the following documents as their Resident Certificate: 1. Signature and stamp in the "Column of Resident Status" in the Income Tax Exemption Certificate or the Business Tax Exemption Certificate by the tax authority of the State to the Agreements or Treaties where the Foreign Company resides; 2. A separate Residence Certificate issued by the tax authority of the State to the Agreements or Treaties where the Foreign Company resides; 3. A special certificate issued by the shipping transportation authority of the government of the State to the Agreements or Treaties where the Foreign Company resides; or 4. The original Business Registration Approval Certificate for Hong Kong Companies (See the attached sample below) issued by the tax authority of the Hong Kong Special Administration Region in the case of a Hong Kong company. Unless there is a special need, the Hong Kong company is not required to provide the Resident Certificate of Hong Kong Companies issued by the tax authority of Hong Kong. The above forms of Resident Certificate shall be valid for a period of three years after they are issued by the relevant authorities of the State to the Agreements or Treaties where the foreign company resides. In case that, within such a three-year valid period, the resident status of the taxpayer changes or the Resident Certificate it holds is no longer valid, it shall provide a new and valid Resident Certificate and apply for a new Tax Exemption Certificate in accordance with the procedure set forth above. II. When the company that has the statutory obligation to make tax declaration and pay taxes in the name of the foreign company pays freight to the foreign company under their export sales contracts, it can make overseas payment directly from its current account in its foreign exchange bank account subject to a authenticity review by a designated bank permitted to do foreign exchange business. In doing so, it should provide the sales contracts or agreements, the invoices issued by the foreign company, the bill of lading and the list attached thereto as well as one of the following documents. The bill of lading (or a copy of it) will be returned to and kept for record by the company that has the statutory obligation to make tax declaration and pay taxes in the name of the foreign company; while the bank will keep for record for a period of three years the sales contracts or agreements (or a copy of them), the invoices of the foreign company and the list attached to the bill of lading: (1) The Certificate of Payment for Enterprise Income Tax and/or Business Tax issued by the local tax authority; (2) If income of the foreign company from international marine transportation is qualified for tax exemption in accordance with the Agreements or Treaties and the application for payment of freight is made at the place where the one-stop approval authority is located, the Income Tax Exemption Certificate and/or the Business Tax Exemption Certificate should be provided; or (3) If income of the foreign company from international marine transportation is qualified for tax exemption in accordance with the Agreements or Treaties and the application for payment of freight is made at other places where the foreign company has business, a copy of the Income Tax Exemption Certificate stamped and dated by the Administration of State Taxes in X City of X Province and/or the Business Tax Exemption Certificate stamped and dated by the Administration of Local Taxes in X City of X Province should be provided. The stamps and the dates on the above copies of Certificates shall be original. III. In case the company that has the statutory obligation to make tax declaration and pay taxes in the name of the foreign company enters into sales agreements with an agent of the foreign company outside China, it can pay freight to the agent of the foreign company directly from its current account in its foreign exchange bank account subject to a authenticity review by a designated bank permitted to do foreign exchange business. In doing so, it should provide, in addition to the supportive documents listed in Article 2 of this Supplementary Notice, the power of attorney (or letter of entrustment) issued by the foreign company to its agent outside China. IV. The Tax Exemption Certificates should be filled in by the applicant in Chinese or in English. V. This Supplementary Notice shall become valid on its date of publication. In case of any discrepancy between this Supplementary Notice and any previous regulations, this Supplementary Notice shall prevail. Any new problem arises in the course of the implementation of this Supplementary Notice should be reported to the State General Administration of taxation and the State Administration of Foreign Exchange. Attachments: 1. List of Tax Exemptions on Income from International Marine Transportation (Omitted) 2. Sample of the Business Registration Approval Certificate for Hong Kong Companies issued by the tax authority of Hong Kong Special Administration Region (Omitted) |
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