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The present rules are formulated in order to better ensure the implementation of the "Measures for Foreign-Funded Enterprises and Foreign Enterprises on the Administration of the Settlement and Payment of Income Taxes" (hereinafter referred to as the "Measures"), regulate the taxation organs' settlement and payment of income taxes for foreign-funded enterprises and foreign enterprises (hereinafter referred to as enterprises), and improve the quality of tax settlement and payment. CHAPTER I OBJECTS OF TAX SETTLEMENT AND PAYMENT Any enterprise which has begun production, operation (including trial production and operation) within the year, or any enterprise which is merged, divided or terminated during the year shall, no matter whether running at profits or losses, make settlement and payment of income taxes in accordance with the relevant provisions in tax laws and the "Measures". However, any of the following enterprises does not have to make settlement and payment of income taxes in the current year: (1) foreign enterprises temporarily coming to China to undertake contract for construction, installation or assembly projects or to provide labor services of less than one year; (2) enterprises which have been cancelled within the period of settlement and payment; or (3) other enterprises approved by the competent taxation organ to be unnecessary to make settlement and payment of income taxes in the current year. CHAPTER II CONTENTS OF TAX SETTLEMENT AND PAYMENT An enterprise's settlement and payment of income taxes includes two contents: one is that the enterprise shall first, in accordance with the "Measures", initiatively adjust and calculate the actual taxable income and the actual amount of income taxes payable in the current tax year, check by itself the income taxes refundable (repayable) in the current tax year and pay the repayable tax; the other is that the competent taxation organ shall, after examining the tax return and other relevant documents submitted by the enterprise, distribute the notification on particulars under settlement and payment, handling refund of overpaid annual income taxes and repayment of any deficiency, and shall gather the documents, analyze the information and summarize the work. CHAPTER III PROCEDURES AND REQUIREMENTS FOR TAX SETTLEMENT AND PAYMENT An enterprise's settlement and payment of income taxes may be specifically divided into three stages, namely, preparation, carryout and summary. The main contents and time schedule in each stage are as follows: (1) Preparation Stage. The competent taxation organ shall, within 3 months from the end of the tax year, carefully do well in the following preparations for settlement and payment: 1. Publicity and Guidance. It shall clarify by announcement or by other means to the tax payers the scope of settlement and payment, the requirements on time, the materials to be submitted and other particulars to be noticed, and shall, when necessary, organize trainings for the tax handlers of enterprises (especially newly established enterprises), and guide them with the relevant taxation policies and procedures for filing tax returns; 2. Clarification of Duties. There shall be leaders responsible for tax settlement and payment, which shall be organized and implemented by the department specifically responsible for daily administration of enterprises' income taxes, and shall be finished with joint cooperation by the functional departments of taxation, administration and check, etc.. When necessary, the competent taxation organ shall also organize tax trainings for the relevant persons; 3. Setting up Bench Sheets. The bench sheets of daily management shall be set up, which shall mainly record such particulars of the enterprise as the amount of prepaid taxes, enjoyment of tax preferences, make-up of losses, pre-tax deduction of property losses, crediting of enterprise income taxes due to purchase of domestic equipment for investment, confirmation of profit years, etc., so that they can be checked in the settlement and payment; 4. Preparatory documents. It shall obtain from the superior taxation organ or print the relevant forms, certificates, lists and books for settlement and payment according to the prescribed pattern. (2) Carryout Stage. The competent taxation organ shall, within 5 months from the end of the tax year, finish checking and examining the enterprises' annual income tax returns and relevant materials as well as handling formalities of punishments and refund (repayment) of taxes. 1. Acceptance of Materials after Check. The competent taxation organ shall, after receiving the enterprises' income tax returns and relevant materials, check whether the submitted materials are complete, and shall, if finding any enterprise that fails to submit complete materials including the relevant attached forms and documents, etc., order it to supplement them within a time limit; if the items are not filled in entirely, the materials shall be returned to the enterprise which shall be ordered to supplement them within a time limit. 2. Imposition of Punishments. If an enterprise fails to file the annual income tax return within the prescribed time limit, and is not approved by the competent taxation organ to delay filing the said tax return, the competent taxation organ may, in addition to ordering it to file the tax return within a time limit, impose a fine of not more than 2000 Yuan in accordance with the Law on the Administration of Tax Collection; if the enterprise still fails to file the tax return before expiry of the time limit, a fine of not less than 2000 Yuan but not more than 10,000 Yuan may be imposed, and meanwhile a "Notification on the Verified Amount of Income Taxes Payable by the Foreign-Funded Enterprise or Foreign Enterprise" shall be sent to it so as to verify its annual amount of tax payable, and order it to make the payment. 3. Examination of Materials. The competent taxation organ shall examine the relevant materials submitted by an enterprise in the following aspects: (a) Whether the enterprise's annual income tax return and attached forms are consistent with the figures in the final accounting statements and the auditing report by Chinese CPA; whether the logic relations between the items match with each other; whether the calculation is correct; whether taxable income and the amount of tax payable have been adjusted according to the auditing report by the CPA; (b) Whether the enterprise has carried over or made up for the amount of losses of the previous year as prescribed; (c) Whether the enterprise meets the conditions for tax reduction and exemption, including whether the reduction or exemption of enterprise income taxes and local income taxes conforms to the existing laws and regulations; whether there is official approval by the taxation organ or local government; information on the tax-reduction or exemption year the enterprise is currently in; when will the tax collection be resumed; whether the enterprise's property losses subject to pre-tax deduction have been submitted to the taxation organ for approval; and so on; (d) Inspecting the income taxes settled by the head offices and the income taxes consolidatedly filed by the foreign enterprise's business offices, whether all data involving calculation of taxable income, which are recorded in the account sheets of the branch office or each business office are accurate; and (e) Tax payment proof of the enterprise's prepaid income tax, with the actually prepaid tax amount being confirmed. 4. Examination and Issuance of Disposition Decision. The competent taxation organ shall, after preliminary examination of the annual tax returns, attached forms and other relevant materials submitted by enterprises as well as in combination with the quarterly income tax returns and the daily administration of collection, send by the end of May the "Notification on the Settlement and Payment of Tax-Related Matters for Foreign-Funded Enterprises and Foreign Enterprises" to the enterprises which shall repay income taxes or whose taxes shall be refunded, and handle refund of excess payment of tax and repayment of any deficiency. 5. Coordinative Management Between Head Office and Branch Office. (a) The competent taxation organ at the locality of a head office or a business office responsible for combined tax returns for the payment of enterprise income taxes (hereinafter referred to as the settlement and payment institution) shall, after accepting the enterprise's consolidated or combined annual income tax return, issue the "Proof of Consolidated or Combined Enterprise Income Tax Return Filed by the Foreign-Funded Enterprise or Foreign Enterprise" to the taxpayer before May 31 of each year (see Annex 1); each of the enterprise's branch offices or business offices (hereinafter referred to as business offices) shall, before June 30 of each year, submit the proof, the annual tax return and the accounting statements to the competent taxation organ at its locality. (b) The competent taxation organ at the locality of a settlement and payment institution may, if in need of further verification of the doubts of the enterprise's business office found out at the time of examining the concentrative or combined tax return materials, send the "Letter for Assistance in Investigating the Tax Matters of the Business Office" (Annex 2) to the competent taxation organ at the locality of the enterprise's business office, which shall be responsible for verifying the matters under assistant investigation, and making a reply by letter on the result to the competent taxation organ at the locality of the settlement and payment institution. (c) The competent taxation organ at the locality of a business office shall, if finding any income tax problem in its daily administration or tax inspection that the business office understates income or overstates costs, timely send the "Contacting Letter for Handling Taxes of the Business Office" to the competent taxation organ at the locality of the settlement and payment institution regarding the relevant information (see Annex 3). (d) The competent taxation organ at the locality of a business office shall, if collecting taxes on the business office at the very place or adjusting the income during the tax-exemption period or the amount of losses in accordance with Article 7 of the "Measures", timely notify by the "Contacting Letter for Handling Taxes of the Business Office" (see Annex 3) the amount of collected tax and the amount of adjusted taxable income to the competent taxation organ at the locality of the settlement and payment institution, which shall make corresponding adjustments on the enterprise's taxable income and total amount of taxes payable, and shall deduct the amount of taxes paid at the locality of the business office from the amount of repayable (refundable) taxes. 6. File-Keeping. The competent taxation organs at all places shall, before July 15 of each year, finish keeping files of the data and materials related to the settlement and payment. (3) Summary Stage. The taxation organs at all places shall, before July 15 of each year, finish such affairs as keeping files of the settlement and payment materials, statistics of data, gathering information and making summary, etc., and shall, before July 31, submit to the State Administration of Taxation the summary of settlement and payment and the relevant statements. The basic contents of the summary shall include: 1. Basic information and relevant analysis. (1) Basic information: It mainly include the number of tax registrants, the number of enterprises which have opened business, the number of enterprises which shall make settlement and payment, the number of enterprises which have actually made settlement and payment, the number of enterprises which have not made settlement and payment and the reason thereof, the number of profit-making enterprises, the income of the profit-making enterprises, the total amount of profits, the losses repaid for the previous year, the taxable income, the amount of income taxes payable, the amount of reduced or exempted income taxes, the amount of actually paid income taxes, the number of loss-running enterprises, the income of the loss-running enterprises, the amount of the losses, etc.; (2) Analysis and statements on main indexes: The following indexes shall be mainly analyzed: the business-opening rate of the enterprises, the range of settlement and payment, the income tax prepayment rate, the tax assumption rate, the range of loss-running enterprises, etc.; (3) Analysis of profits and losses of the enterprises: The changes in the range of earnings shall be analyzed according to the number of profit-making enterprises and the number of enterprises which have actually made settlement and payment, including the analysis of the number of enterprises changed from loss-running ones into profit-making ones and those from profit-making ones into loss-running ones in the current year, which shall be analyzed in contrast with those in the last year, with the reasons and tendency being stated; the increases and decreases and the reasons thereof, the rise and descending rate of the sales profits (losses), etc., by contrasting the profit-making or loss-running enterprises¡¯ such indexes as sales income, export sales income, costs, expenses, total amount of profits before repayment of the losses, total amount of losses, etc. with those in the last year, shall be analyzed; (4) Analysis of the tax payment: It includes the changes in the prepayment rate, the prepayment, repayment and refund of income taxes, the number of enterprises under tax exemption, tax reduction by half or tax collection in total amount, the amount of exempted or reduced income taxes, the assumption of taxes, and so on. 2. Information on tax returns initiatively filed by enterprises. It mainly includes information on filling in and filing the tax returns and attached forms, the number of enterprises which make initiative adjustments (including adjustment through the CPA¡¯s auditing), the main projects and the amount, etc.. 3. Information on lawful adjustments by the taxation organ. It mainly includes the number of enterprises lawfully adjusted by the taxation organ, the main projects, the amount, as well as the increase or decrease of the taxable income, the amount of income taxes payable, total number of enterprises at loss, amount of losses, etc.. 4. Information on main methods. It mainly includes the information on organization and arrangements of the settlement and payment, information on tax trainings for internal employees, pre-stage publicity, trainings and guidance to enterprises, information on verification of tax returns and information on inspection, assessment and appraisal of the settlement and payment. 5. Problems found and feedbacks. The problems may be divided into two aspects, that is, the enterprises and the taxation organ. The former aspect mainly includes the information on filling in and filing tax returns and using software, and implementing the "Measures", as well; the latter aspect mainly includes the information on application of the working rules on the settlement and payment of income taxes in practices, and the effects thereof, as well as statements on the existing problems and the opinions and advice for improvement. CHAPTER IV DOCUMENTS MENTIONED IN THE "MEASURES" AND THE PRESENT RULES The documents mentioned in the "Measures" and the present rules shall be printed and produced by the users according to the patterns respectively prescribed by the administrations of state taxes of all provinces, autonomous regions, municipalities directly under the Central Government and cities directly under separate state planning and Shenzhen City Administration of Local Taxes. CHAPTER V OTHERS The present working rules shall come into force as of 2002. The "Working Rules for Foreign-Funded Enterprises and Foreign Enterprises on the Settlement and Payment of Income Taxes" printed and distributed by Doc. 9 [2001] Promulgated by the State Administration of Taxation and the "Supplementary Notice on the Relevant Issues Concerning the Measures and Working Rules for Foreign-Funded Enterprises and Foreign Enterprises on the Administration of the Settlement and Payment of Income Taxes" distributed by Letter 319 [2001] of the State Administration of Taxation shall be abrogated simultaneously. Annexes: 1. Proof of Consolidated (Combined) Income Tax Return Filed by the Foreign-Funded Enterprise or Foreign Enterprise (omitted) 2. Letter for Assistance in Investigating the Tax Matters of the Business Office (omitted) 3. Contacting Letter for Handling Taxes of the Business Office (omitted) 4. Consolidated Form for Foreign-Funded Enterprises and Foreign Enterprises on the Settlement and Payment of Income Taxes (Category A) (omitted) 5. Concentrative Form for Foreign-Funded Enterprises and Foreign Enterprises on the Settlement and Payment of Income Taxes (Category B) (omitted) 6. Index Analysis Form for Foreign-Funded Enterprises and Foreign Enterprises on the Settlement and Payment of Income Taxes (Category A) (omitted) 7. Settlement and Payment Report -- Comprehensive Data Form (omitted) 8. Settlement and Payment Report -- Information Analysis Graph (omitted) 9. Settlement and Payment Report -- Annual Contrast Form (omitted) |
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