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	MEASURES FOR JOINT TAX AUDIT ON FOREIGN-RELATED ENTERPRISES (TRIAL)

	(Notice of the State Administration of Taxation on Printing and Distributing the Measures for Joint Tax Audit on Foreign-related Enterprises (Trial) (No.38 [2004] of the State Administration of Taxation April 6, 2004): With a view to further regulating the foreign-related tax audit and improving the efficiency of tax administration, the State Administration of Taxation hereby formulates the Interim Measures for Joint Tax Audit on Foreign- Related Enterprises (hereinafter referred to as the Measures), which are printed and distributed to you now. And the notice on the relevant issues concerning the implementation thereof is made as follows: I. Improving understanding. Tax audit is a kind of management means for obtaining the tax-related information of taxpayers through adoption of modern audit technology and making analysis and examination thereon, whose normative working papers, sufficient tax-related information, advanced audit technology and neutral audit conclusions are not only conducive to reducing the tax management risk and improving tax management efficiency, but also of advantage to relieving the burden of taxpayers, and making close the relations between tax collectors and taxpayers. All the localities shall be fully aware of the role of tax audit and take measures to bring its functions into play. II. Regulating the management. As a major means for routine inspection, tax audit has, after being popularized and applied in foreign-related enterprises in recent years with its efficiency increasingly manifesting, been accepted by the tax collectors and taxpayers increasingly. But there are still such phenomena as the inconformity of the audit with the requirements, long position into accounts and repeated obtaining of data. Therefore, the tax audit on foreign-related enterprises, which make trans-regional management and pay enterprise income tax on a consolidated basis, shall be organized and made by the upper level tax authorities in accordance with the provisions of the "Measures". And a trial implementation of joint tax audit may also be made on such enterprises, which are under the co-management of the administrations of state taxation and local taxation in accordance with the provisions of the "Measures". This is a powerful method for strengthening cooperation between all local tax authorities and between the administration of state taxation and that of local taxation. All the localities shall think highly of it and try to make great achievements. III. Attaching importance to efficiency. The amount of working papers as prescribed in the Procedures for Foreign-related Tax Audit is large, so all the localities may use them by selection. At the beginning of the popularization of the Measures, all the localities may single out some large foreign-related enterprises as the objects for implementing joint tax audit. It is unnecessary to pursue the large number of the enterprises undertaking the tax audit. The focus shall be laid on ensuring the quality and improving efficiency. IV. Strengthening communications. When carrying out the joint tax audit, the upper level and lower level tax authorities, tax authorities in brother provinces and cities and the administrations of state taxation and local taxation shall strengthen communication and collaboration to ensure the actualization of the Measures. All the localities shall, before the end of May, 2004, report to the State Administration of Taxation (international taxation department, the same hereinafter) the name lists and the basic information of the foreign-related enterprises, which make trans-province or trans-city management and pay enterprise income tax on a consolidated basis; and before the end of this year, reflect the conditions for implementing the Measures to the State Administration of Taxation, who shall then organize spot-check and circulate a report)


SUBJECT : FOREIGN-RELATED ENTERPRISES; JOINT TAX AUDIT
ISSUING DEPARTMENT : THE STATE ADMINISTRATION OF TAXATION
ISSUE DATE : 04/06/2004
IMPLEMENT DATE : 04/06/2004
LENGTH : 1,015 words
TEXT :

I. The present Measures are hereby formulated in accordance with the Law of the People's Republic of China on the Administration of Tax Collection and its detailed implementation rules for the purpose of further regulating the tax audit on enterprises with foreign investment and foreign enterprises (hereinafter referred to the foreign-related enterprises), improving efficiency of administration on tax collection, relieving the burden of taxpayers, and optimizing the environment of tax administration on foreign-related enterprises.

II. The joint tax audit shall be the following two kinds:

1. The tax audit carried out by each competent tax authority in the corresponding term on a foreign-related enterprise, which makes trans-regional management and pays enterprise income tax on a consolidated basis (hereinafter referred to the trans-regional joint tax audit); and

2. The tax audit carried out jointly by both the administration of state taxation and that of the local taxation (hereinafter referred to the "joint tax audit by the administration of state taxation and that of local taxation"), which are responsible for the administration of collection of tax on foreign-related enterprises making business operation in the same region.

III. The form of organization of the trans-regional joint tax audit

The trans-regional joint tax audit shall be organized and implemented by the competent tax authority in charge of enterprise income tax, and shall be mainly applicable to the audit on enterprise income tax, and the audit on other categories of taxes subject to the administration of the respective tax authority may also be concurrently carried out.

If the tax authority that organizes the trans-regional joint tax audit fails to give a notice on trans-regional joint tax audit tasks, no competent tax authorities of all the localities at the lower level may arrange for the tax audit by themselves. The tax authorities that organize to implement the trans-regional joint tax audit shall be:

1. The tax audit on foreign-related enterprises that make trans-provincial (including autonomous regions, municipalities directly under the Central Government, and cities directly under state planning) management shall be organized and implemented by the State Administration of Taxation;

2. The tax audit on foreign-related enterprises that make trans-regional (or city) management shall be organized and implemented by the tax bureaus at the provincial (including cities directly under state planning) level. And

3. The tax audit on foreign-related enterprises that make trans-county (city) management shall be organized and implemented by the tax bureaus of the respective district (or city).

In case any issue regarding the categories of taxes that are not subject to the administration of the respective tax authority is encountered when making trans-regional joint tax audit, the competent tax authority shall be notified and the relevant joint tax audit shall be made if necessary.

IV. Form of Organization of Joint Tax Audit by the Administrations of State Taxation and Local Taxation

1. Where a foreign-related enterprise whose enterprise income tax and the circulation tax on the main business are subject to the administration of the same tax bureau, the tax bureau shall, after putting forward the audit plan and notifying the enterprise of the competent tax authorities in charge of other applicable categories of taxes, organize the relevant competent tax bureaus to carry out the tax audit jointly.

2. Where a foreign-related enterprise whose enterprise income tax and the circulation tax on its major business are subject respectively to the supervision of the administrations of state taxation and that of local taxation, the competent administrations of state taxation and local taxation shall put forward the tax audit plans together, and jointly organize the implementation of tax audit.

V. Where a trans-regional joint tax audit is carried out, the tax authorities responsible for organizing the implementation may take the following two ways: the first one is to transfer the personnel of all the relevant tax authorities in charge to plan the tax audit as a whole. And the second one is to prescribe the time limit for the joint tax audit, within which all the competent tax authorities shall carry out the tax audit.

After finishing the audit, the competent tax authorities at the place where the foreign-related enterprise pays taxes on a consolidated basis shall be responsible for compiling the relevant documents concerning the tax audit on a consolidated basis, serve them to the foreign-related enterprise, and handle such matters concerning the refund and supplement of tax money, late fees and entry of fines in treasury, etc..

VI. Where the administrations of state taxation and local taxation carry out the joint tax audit, the competent tax authorities in charge of the administration of state taxation and that of local taxation shall transfer personnel respectively, who shall enter the audit site, and take in charge of the tax audit on the relevant matters concerned respectively.

The administration of state taxation and that of local taxation in charge of the foreign-related enterprises shall strengthen communications during the audit, and study together the audit conclusions and the audit report. If the same tax-related indicators are involved, the calibers and the data shall be consistent with each other.

After finishing the audit, the administration of state taxation and that of local taxation in charge of the foreign-related enterprises shall compile the relevant documents concerning the tax audit respectively, and serve them to the enterprises, and handle matters such as refunding and supplementing the tax money, late fees and bringing the fines into the treasury.

VII. When carrying out the joint tax audit, all the tax documents shall be compiled in accordance with the requirements of the Procedures for Foreign-related Tax Audit. And proper audit method and technology shall be adopted. All the similar tax audit documents concerned shall have several copies to ensure the share of achievements.

VIII. The joint tax audit on the same foreign-related enterprise shall not be made more than once within a taxpaying year.

IX. The present Measures are not applicable to the checking of tax-related cases by tax authorities.

X. The power to interpret the present Measures shall remain with the State Administration of Taxation.

XI. The present Measures shall come into force as of their promulgation.