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	SUPPLEMENTARY NOTICE OF THE STATE ADMINISTRATION OF TAXATION CONCERNING ENTERPRISE INCOME TAX PREFERENTIAL POLICES ENJOYED BY FOREIGN-FUNDED ENTERPRISES THROUGH INVESTMENTS INCREASE

	(No. 368 [2003] of the State Administration of Taxation promulgated on March 28, 2003)


SUBJECT : CORPORATE TAXATION; FOREIGN-FUNDED; INVESTMENT INCREASE
ISSUING DEPARTMENT : STATE ADMINISTRATION OF TAXATION
ISSUE DATE : 03/27/2003
IMPLEMENT DATE : 04/01/2002
LENGTH : 586 words
TEXT :

We hereby further clarify the relevant issues in the implementation of the Notice of the Ministry of Finance and the State Administration of Taxation on Enterprise Income Tax Preferential Polices to Be Enjoyed by Foreign-Funded Enterprises That Increase Investments (No. 56 [2002] of the Ministry of Finance and the State Administration of Taxation) as follows:

I. SCOPE OF PROJECTS IN THE ENCOURAGED CATEGORY

In accordance with the Notice of the State Administration of Taxation on the Relevant Taxation Issues Concerning the Implementation of the New "Catalogue for Guiding Foreign Investment in Industry", the "projects in the encouraged category" provided for in Document No. 56 [2002] of the Ministry of Finance and the State Administration of Taxation shall mean the projects of encouraged category and restricted Category B in the Catalogue for Guiding Foreign Investment promulgated by the original State Development Planning Commission and other departments in 1997 on the condition that the investments are approved before April 1, 2002 to be increased to such foreign-funded projects; or shall mean the projects of encouraged category in the Catalogue for Guiding Foreign Investment promulgated by the original State Development Planning Commission and other departments in 2002 on the condition that the investments are approved after April 1, 2002 to be increased to such foreign-funded projects.

II. CALCULATING THE NEWLY-INCREASED REGISTERED CAPITAL DUE TO INCREASE OF INVESTMENTS FOR MORE THAN ONE TIME

Where, for any production and operation project formed from increase of investments (excluding the increase of investments not for newly formed production and operation projects) for more than one time by a foreign-funded enterprise after its pre-stage investment, along with the pre-stage investment project, the enterprise does not enjoy the preferential treatment of regular tax reduction or exemption, the said production and operation project may be incorporated into one project for the calculation of newly-increased registered capital. If the newly-increased registered capital of the said incorporated project meets the conditions prescribed in Article 1 of Document No. 56 [2002] of the Ministry of Finance and the State Administration of Taxation, the preferential treatment of regular tax reduction or exemption may be separately calculated on the basis of the incorporated project for enjoyment.

III. CALCULATING THE "ORIGINAL REGISTERED CAPITAL"

The "original registered capital" mentioned in Document No. 56 [2002] of the Ministry of Finance and the State Administration of Taxation shall mean the registered capital that a foreign-funded enterprise has contributed before it increases investments for the new production and operation project or the incorporated project mentioned in Article 2 of the present Notice.

IV. CALCULATING THE PREFERENTIAL PERIOD FOR TAX REDUCTION OR EXEMPTION DUE TO INCREASE OF INVESTMENTS FOR MORE THAN ONE TIME

With respect to an incorporated project of production and operation formed with the increased investments by a foreign-funded enterprise for more than one time, if the preferences of regular tax reduction or exemption are separately calculated in accordance with Article 2 of the present Notice for enjoyment, the preferential period for tax reduction or exemption shall be calculated as of the profit year of the production and operation project formed with the initial investment among the investments increased for more than one time; moreover, the taxpayer involved may begin to enjoy the preferences during the remaining years covered by the preferential period for tax reduction or exemption as of the year when the investments increased for more than one time have satisfied the conditions prescribed in Article 1 of Document No. 56 [2002] of the Ministry of Finance and the State Administration of Taxation.