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With respect to the issues passed on by the customs offices in the course of execution of tax exemption and reduction policies, for the purpose of unifying the law enforcement measures, the relevant issues are, through careful deliberation, hereby clarified as follows on the basis of the opinions sought from the customs offices: I. SEVERAL ISSUES IN THE EXECUTION OF THE NOTICE OF THE STATE COUNCIL ON ADJUSTING THE TAXATION POLICIES ON IMPORTED EQUIPMENT (NO.37 [1997] OF THE STATE COUNCIL, HEREINAFTER REFERRED TO NOTICE FOR SHORT) (1) "industrial items" in the Notice According to the Notice, the function of the project examination and approval department is to take control of, according to the catalogues of domestic-funded and foreign-funded industries (that is the Catalogue of the Industries, Products, and Technologies Encouraged by the State for Development at the Present Time, hereinafter the same), issuing the Confirmation of Domestic-Funded or Foreign-Funded Projects Encouraged by the State for Development to the projects entitled to enjoy import and export tax preferential treatments, and the major function of customs offices is to correctly examine the catalogues of non-tax-free commodities of domestic-funded and foreign-funded projects (that is the Catalogue of Non-Tax-Free Imported Commodities of Domestic-Funded Projects, and the Catalogue of Non-Tax-Free Imported Commodities of Foreign-Funded Projects, hereinafter the same), and to reduce or exempt the tax on the commodities entitled to import tax preferential treatments. The local customs offices shall earnestly perform their duties, and at the same time strengthen the contact and cooperation with the examination and approval departments to impose strict control jointly and to implement the state policies practically. With respect to the Confirmation of Domestic-Funded or Foreign-Funded Projects Encouraged by the State for Development issued by a local examination and approval department, if the customs office deems an item cited as obviously inappropriate, it may initiate communication and consultation with the project examination and approval department, and where an agreement cannot be reached, the local examination and approval department shall report to the competent authorities of the state for confirmation, and shall send a copy of the documents submitted and the confirmation to the customs office directly under the GAC of the place where the project is located. That customs office directly under the GAC may, generally, execute the opinions approved or confirmed by the competent authorities of the state, and if it really deems that the opinions go against the provisions of the documents, it may also request for instructions from the GAC again. Issues with respect to the authority of project examination and approval may also be handled according to the abovementioned principles. (2) Definition Of Imported Equipment, Accessories, And Spare Parts For the purpose of unified law enforcement, the customs offices shall, in execution of the policies, pay attention to demarcation of the scope of equipment, accessories, and spare parts, apart from earnestly carrying out the catalogues of non-tax-free commodities of domestic-funded and foreign-funded projects. The commodities included in chapters 84 and 85 of the Rules on Tariff and in the tax items or sub-items specified as parts and accessories, as well as the commodities included in tax numbers of 84.80, 84.82, 84.84, 85.23, 85.32-85.37, 85.39-85.42, and 85.44-85.47, may not be treated as equipment when they are imported separately; equipment and parts shall be differentiated with respect to the commodities included in tax number 84.49 (where the equipment and the parts are under the same tax number); and other commodities included in chapters 84 and 85 of the Rules on Tariff may be treated as an equipment in general. However, with respect to the commodities under tax number 85.24 that are separately imported, only the part that is equipment technology may be treated as equipment. (3) Tax Exemption And Reduction For Leased Imported Goods With respect to the imported equipment leased by the investment projects meeting the catalogues of domestic-funded and foreign-funded industries, if the final ownership of the equipment belongs to a domestic project entity, and is for self-use by that entity, the customs office may put the project on record and make the examination and approval on the strength of the Confirmation of Domestic-Funded or Foreign-Funded Project Encouraged by the State for Development issued by the examination and approval department. (4) Tax Exemption And Reduction For The Molds Under Import Tax Number 8207 Punching molds under tax number 8207 that are imported separately by encouraged projects fall within the commodities included in the Catalogue of Non-Tax-Free Imported Commodities of Domestic-Funded Projects, and the Catalogue of Non-Tax-Free Imported Commodities of Foreign-Funded Projects, and taxes shall be levied upon them according to the regulations. (5) Determination Of The Quota Of Tax Exemption And Reduction For Foreign-Funded Enterprises Customs offices shall put on record the encouraged projects that are approved after January 1, 1998 on the basis of the quota of foreign exchange use specified in the Confirmation of Domestic-Funded or Foreign-Funded Project Encouraged by the State for Development issued by the competent authorities, and with respect to all the equipment, as well as the accessories and spare parts, imported in those projects, shall issue a Certificate of Tax Collection or Exemption for Imported or Exported Goods applied for by enterprises, no matter whether taxes are exempted, and deduct the quota of foreign exchange use accordingly. The customs offices need not issue the Certificate of Tax Collection or Exemption for Imported or Exported Goods with respect to the goods imported in non-encouraged foreign-funded projects. (6) Changes Of The Amount Of Foreign Exchange Used As A Result Of The Changes Of Exchange Rate Where the quota of foreign exchange use specified in the Confirmation of Domestic-Funded or Foreign-Funded Projects Encouraged by the State for Development is in a currency different from that used in the actual import transaction, and where the actual prices of the imported goods exceed, as a result of the change of exchange rate, the quota of foreign exchange use that has been put on record for tax exemption or reduction, the customs office may adjust the quota according to the exchange rate at the time of conclusion of the contract. Other projects of tax exemption and reduction may also be handled according to this principle. (7) How To Handle The Taxes Where Tax-Free Equipment Imported In An Encouraged Project Is Still In Supervision Period After The Project Has Been Completed Where the equipment is still used by the enterprise, no taxes need to be made up, and the customs office shall supervise such equipment until the end of the supervision period; where the equipment has been transferred, taxes shall be made up pursuant to the provisions or the formalities for carrying forward shall be gone through upon approval. II. ISSUES CONCERNING TAX EXEMPTION AND REDUCTION FOR SCIENTIFIC AND EDUCATIONAL SUPPLIES (1) Determination Of The Qualification Of Tax-Free Scientific Research Institutes a. An entity applying for the qualification for tax exemption on scientific and educational supplies needs to provide the following documents to the customs office: (1) written application filed by the applicant entity; (2) documents of approval for establishment issued by the competent authorities prescribed by the documents; (3) in the case of a public institution, the certificate of public institution with legal person status; and (4) where the institute has changed into an enterprise, the business license and the relevant documents. b. Considering that military units are different from local entities, military scientific research institutes are exempt from providing the Certificate of Public Institution with Legal Person Status c. Where a higher level department in charge has transformed into a state-owned large-scale enterprise group corporation from a functional department of the government as a result of institutional reform, the qualification of the subordinate scientific research institutes thereof shall still be determined pursuant to the requirements of the documents. d. With respect to the scientific research institutes of which the structures have been changed, the issues shall be handled on the strength of the documents of approval of the relevant competent authorities of the provinces, autonomous regions, municipalities directly under the Central Government, and cities directly under State Planning, or of the state, and in accordance with the spirit of the Notice of the General Administration of Customs Concerning the Relevant Tax Policies Concerning Scientific Research Institutes after Their Structures are Changed (No.111 [2000] of GAC). (2) Examination Of Commodities The scientific and educational supplies imported free of tax by colleges and universities (including medical colleges) and scientific research institutes shall be examined according to the scope of commodities specified in the Interim Provisions on Exemption of Import Taxes on Scientific and Educational Supplies. The medical instruments, such as ventilators, patient monitors, heart pacemakers, and dentistry chairs, etc., imported by medical colleges and universities shall not be exempt from taxes. The customs offices shall strictly carry out the policies of the state on import tax preferential treatments, strengthen the administration, monitoring, analysis, and training, and may not make examination and approval beyond their authorities. Please pass on the problems arising in the execution, and present opinions and suggestions in good time. |
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