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The present measures are formulated in accordance with the relevant provisions in the Income Tax Law of the People's Republic of China for Foreign-Funded Enterprises and Foreign Enterprises (hereinafter referred to the Tax Law) and the detailed rules for its implementation as well as the Law of the People's Republic of China on the Administration of Tax Collection (hereinafter referred to the Law on the Administration of Tax Collection) and the detailed rules for its implementation to further regulate the final settlement of income tax for foreign-funded enterprises and foreign enterprises (hereinafter referred to enterprises). Article 1. Any enterprise which has begun the production, operation (including test production and test operation) within the tax year, or any enterprise which is merged, divided or terminated during the tax year shall, no matter whether running at profits or losses, make final settlement of income tax in accordance with the relevant provisions in the Tax Law and the present measures, unless otherwise approved by the competent taxation organ. Article 2. An enterprise shall, within four months from the end of the tax year, fill in its annual income tax return, file the tax returns of the last year in respect of the taxable income, the amount of income tax payable, the amount of reduced or exempted income tax, the amount of credited income tax, and the amount of income tax repayable abroad to the competent taxation organ, and shall check and pay by itself the amount of taxes payable after subtracting the amount of prepaid income tax from the actual amount of taxes payable of the whole year; the competent taxation organ shall, within five months from the end of the tax year, make an ordinary examination on the enterprise's annual tax returns and the relevant materials, and complete handling the refund of overpaid annual income tax and repayment of any deficiency. Article 3. An enterprise which is merged, divided or terminated during the year shall, within 30 days as of the cessation of its production or operation, file the income tax return to the competent taxation organ, and pay the repayable taxes into the account; the competent taxation organ shall, within 60 as of the cessation of the enterprise's production or operation, finish examining the enterprise's tax return materials and complete handling the refund of overpaid annual income tax and repayment of any deficiency. Article 4. An enterprise shall, when filing an annual income tax return, truthfully fill in and submit the following statements and materials: (1) its annual income tax return and the attached forms; (2) the annual final accounting statements; (3) the auditing report by Chinese CPA; and (4) other materials required by the competent taxation organ to be submitted. Article 5. An enterprise shall, before filing the annual income tax return, inspect whether the following particulars have been submitted to the competent taxation organ for approval, correction or confirmation: (1) Enjoyment of tax preferences. It mainly includes confirmation of the profit-making years, making-up of losses, lawfully enjoyed regular tax reduction or exemption, lowered tax rate for certain items or industries, mark-on deduction of technological development fees, crediting of enterprise income tax due to purchase of domestic equipment for investment, reduction and exemption of local income tax, and so on; (2) Items of costs and expenses listed before tax. They mainly include bad debt reserve, property losses, interest of loans, wages and welfares; (3) changes of the enterprise's relevant accounting methods; and (4) other items which must be approved by the competent taxation organ. Article 6. If an enterprise is unable to file the annual income tax return or prepare the complete materials for the annual income tax return within the prescribed time limit due to a particular reason, it shall, within four months from the end of the tax year, submit an application to the competent taxation organ for extension of the time limit by filling in the "Application Form for Approval of Extension of Time Limit for Filing the Tax Return", and may, upon approval by the competent taxation organ, properly extend the time limit, or first submit the income tax return and the attached forms prescribed, and then submit other relevant statements and materials by properly extending the time limit. The time limit approved by the competent taxation organ to be extended shall not exceed one month at the most. Article 7. The head office or business office of an enterprise which pays income tax by filing concentrative or combined tax return (hereinafter referred to final settlement institution) shall, before May 31 of each year, obtain the "Proof of Concentrative or Combined Enterprise Income Tax Return Filed by the Foreign-Funded Enterprise or Foreign Enterprise" from the competent taxation organ in charge of the final settlement institution, and shall, before June 30, serve the proof, the annual tax return and the accounting statements to the competent taxation organ at the locality of its branch office or business office (hereinafter referred to business office). If the head office or business office fails to provide the competent taxation organ at the locality of the business office with the above mentioned concentrative tax return proof issued by the competent taxation organ at the locality of the final settlement institution within the above prescribed time limit, and does not have the approval documents for delayed tax return, the competent taxation organ at the locality of the business office shall be responsible for inspecting and verifying, or ratifying the taxable income of the business office, and shall, in combination with the tax treatments prescribed in tax laws and regulations, calculate the amount of taxes repayable, collect the taxes at the very place and impose punishments; however, if the enterprise's concentrative tax return is in a loss-making year or tax-exemption year, the competent taxation organ at the locality of the business office shall notify the competent taxation organ at the locality of the final settlement institution in writing to uniformly adjust and handle the taxes. Article 8. An enterprise shall, when filing an annual income tax return, require the Chinese CPA to list details related to tax adjustment such as the items, reasons, basis, calculation process, adjusted amount, etc. in its annual auditing report, and indicate the annual taxable income. Article 9. If, after filing the annual income tax return and checking and paying by itself the amount of taxes repayable, an enterprise still has to repay income tax upon verification by the competent taxation organ, it shall, after the receipt of the "Notification on Final Settlement of Income Tax-Involved Matters for Foreign-Funded Enterprises and Foreign Enterprises" (see Attachment 1) served by the competent taxation organ, repay the tax amount into the account within the prescribed time limit. Article 10. If, after filing the annual income tax return and being verified by the competent taxation organ, an enterprise needs to request the refund of taxes, it shall timely apply to the competent taxation organ for refund of taxes after the receipt of the "Notification on Final Settlement of Income Tax-Involved Matters for Foreign-Funded Enterprises and Foreign Enterprises" (see Attachment 2) served by the competent taxation organ, and shall go through the formalities of tax refund as required by the competent taxation organ. Article 11. If, within the time limit for final settlement of income tax, an enterprise finds any error in the income tax return of the current year, it may, within the time limit for final settlement of income tax, file the annual income tax return and make the final settlement for a second time to the competent taxation organ. Article 12. If the last day of the time limit for an enterprise to submit statements is a legal holiday, the next day following the expiry day of the holiday shall be considered the last day of the time limit. If 3 or more consecutive days within the time limit are legal holiday, the time limit shall be postponed according to the number of days in the holiday. Article 13. 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, or if the materials it submits are incomplete or unqualified, it shall, after the receipt of the "Letter on Ordering a Correction Within the Time Limit" served by the competent taxation organ, make up for the materials within the prescribed time limit. 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, a fine of not less than 2000 Yuan but not more than 10,000 Yuan may be imposed, and meanwhile its annual amount of taxes payable shall be verified, and it shall be ordered to pay the taxes within a time limit. The enterprise shall, after the receipt of the "Notification on the Verified Amount of Income Tax Payable" (see Attachment 3) served by the competent taxation organ, pay the taxes within the prescribed time limit. Article 14. If an enterprise fails to make final settlement of income tax within the prescribed time limit, the competent taxation organ shall, in addition to ordering it to make the final settlement within the time limit, levy a fine on the tax in arrears, if any, at 0.05% as of the day when the fine on the tax in arrears occurred. Article 15. If an enterprise is in dispute with the taxation organ over tax payment, it may, only after paying the tax and the fine on the tax in arrears according to the decision of the competent taxation organ on the tax payment or providing the corresponding guaranty, apply to the taxation organ at the next higher level of the competent taxation organ for administrative reconsideration within 60 days as of the payment of the tax or provision of the corresponding guaranty. Article 16. The enterprises approved by the competent taxation organ to adopt a non-Gregorian calendar year as the tax year shall, within 5 months from the end of the tax year, finish the annual final settlement of income tax by referring to the present measures. Article 17. The present measures shall come into force in year 2002. The Working Rules for Foreign-Funded Enterprises and Foreign Enterprises on Final Settlement of Income Tax printed and distributed by Doc. 9 [2001] of 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 Final Settlement of Income tax distributed by Letter 319 [2001] of the State Administration of Taxation shall be abrogated simultaneously. Attachments : 1. "Notification on Final Settlement of Income Tax-Involved Matters for Foreign-Funded Enterprises and Foreign Enterprises" (applicable for enterprises which repay taxes) (omitted) 2. "Notification on Final Settlement of Income Tax-Involved Matters for Foreign-Funded Enterprises and Foreign Enterprises" (applicable for enterprises to which taxes may be refunded) (omitted) 3. "Notification on the Verified Amount of Income Tax Payable for Foreign-Funded Enterprises and Foreign Enterprises" (omitted) |
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