PRC Corporate Income Tax Law and Implementation Rules by xjg71881

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									PRC Corporate Income Tax Law
            and
    Implementation Rules


        RSM Nelson Wheeler
         Structure, Transaction & Tax Advisor

             December 2007
New CIT Law and IRs
                   The New Law        Implementation Rules
                    (“CIT Law”)             (“IRs”)
 Promulgation      16 March 2007        6 December 2007
    Date
 Effective Date    1 January 2008         1 January 2008

   CIT rate: 25%; Withholding tax rate: 10%

   Certain Implementation Measures will be issued by the PRC
   State Administration of Taxation soon
New CIT Law and IRs
  CIT Law: 8 Chapters and 60 Articles
  IRs: 8 Chapters and 133 Articles
  –   Chapter 1 - General Provisions
  –   Chapter 2 - Taxable Income
  –   Chapter 3 - Tax Payable
  –   Chapter 4 - Tax Incentives
  –   Chapter 5 – Tax Withholding
  –   Chapter 6 - Special Tax Adjustments
  –   Chapter 7 - Tax Administration
  –   Chapter 8 - Supplementary Provisions
Chapter 1 – General Provisions
 Chapter 1 - General Provisions
Applicability         All enterprises and income receiving organizations
(CIT Law Art. 1)      within PRC except Sole Proprietorships and
                      Partnerships
  Resident            Companies incorporated under the PRC laws and
 Enterprise           regulations; or
(CIT Law Art. 2)      Companies incorporated under non-PRC laws and
                      regulations but actual management and control is in
                      the PRC
                   Establishments of “actual management and control” (IRs Art. 4):
                   establishments that execute substantial and overall management
                   and control over an enterprise’s manufacturing and business
                   operations, personnel, accounting, properties, etc.
Chapter 1 - General Provisions
Non-Resident        Companies incorporated under non-PRC laws and
 Enterprise         regulations; and
(CIT Law Art. 2)    actual management and control is outside the PRC;
                    and
                 a) with place of business or establishment in the PRC
                    and derived PRC sourced income; or
                 b) without place of business or establishment in the
                    PRC but derived PRC sourced income
  Chapter 1 - General Provisions
  Non-Tax          “place of business or establishment” (IRs Art. 5)
  Resident           Any establishment engaged in manufacturing and business operating
(CIT Law Art. 2)     activities within PRC, including (1) place of management, operation
                     or administration; (2) farm, factory or place of extraction of natural
                     resources; (3) place where services are rendered; (4) place of
                     construction, installation, assembly, repair, and exploitation, etc.; (5)
                     other establishments engaged in manufacturing and business
                     operating activities.
                     If a non-resident enterprise entrusts a business agent to engage in
                     manufacturing and business operating activities in the PRC, including
                     where the entrusted entities or individuals sign contracts, or store and
                     deliver commodities on behalf of the non-resident enterprise on a
                     regular basis, the business agent shall be regarded as an
                     establishment of the non-resident enterprise in the PRC
 Chapter 1 - General Provisions
 Taxability      Resident Enterprise
(CIT Law Art. 3)  – Worldwide income subject to PRC tax
                 Non-Resident Enterprise
                  – Profit derived from place of business or establishment
                    in PRC (including non-PRC sourced income that is
                    effectively connected with its establishment in the PRC)
                  – If there is no place of business or establishment in PRC,
                    the PRC sourced income derived
  Tax Rate          Unified CIT rate: 25%
(CIT Law Art. 4)    Withholding tax rate: 20% (reduced to 10% IRs Art. 91)
Chapter 2 - Taxable Income
Chapter 2 – Taxable Income
   Taxable            Taxable Income = Gross income - non-taxable
   Income             income - tax-exempt income - deductible items -
(CIT Law Art. 5)      prior year’s carried forward tax losses

                   Taxable income is calculated on an Accrual Basis (IRs Art. 9)
Chapter 2 – Taxable Income
  Revenue          Whether in monetary terms or in-kind, including:
(CIT Law Art. 6)   –   Revenue from sales of goods
                   –   Revenue from provision of labor services
                   –   Gross proceeds from transfer of property
                   –   Dividend income from private and listed enterprises and
                       other distributions with respect to equity interests
                   –   Interest income
                   –   Rental income
                   –   Royalty income
                   –   Donations
                   –   Other income
Chapter 2 – Taxable Income
  Dividend         Dividend income is realized on the date when the
  Income           profit distribution is legally declared by the invested
 (IRs Art. 17)     entity
  Interest,        Recognized when the amount becomes payable as
   rental,         stipulated in the agreement
   royalty
(IRs Art. 18-20)
  Donation         Recognized when the donated assets are actually
 (IRs Art. 21)     received
Chapter 2 – Taxable Income
Non-Taxable        Governmental funding
  Income
(CIT Law Art. 7)
                   Official receipts and administrative charges
                   collected in accordance with relevant laws and
                   included under a governmental budget system
                   Other non-taxable income as stipulated by the State
                   Council
Chapter 2 – Taxable Income
 Deductible           Expenditure incurred in connection with operational
 Expenses             activities on a reasonable and actual basis, including
(CIT Law Art. 8)      costs, expenses, taxes, losses and other items is
                      deductible when computing taxable income
                      Revenue expenditure is directly deducted in the
                      period of occurrence
                      Capital expenditure should be deducted by
                      amortization over a relevant period
                   “in connection with” (IRs Art. 27): expenses directly connected to
                   the production of income
                   “reasonable” (IRs Art. 27): necessary and normal expenses in
                   line with ordinary business operations
Chapter 2 – Taxable Income
Wages and          Reasonable wages and salaries actually incurred are
 Salaries,         tax deductible
  Social           Employees’ basic social security contribution
 Security          pursuant to the relevant regulations are tax deductible
(IRs Art. 34-36)
                   Additional insurance for investor and staff (medical
                   and retired) within government stipulated range is tax
                   deductible
                   Commercial insurance beyond government stipulated
                   range for investor and staff is non deductible
Chapter 2 – Taxable Income
  Interest         Capitalized interest expenses is not deductible
Expenses and
                   Interest paid on bank loans is tax deductible
 Exchange
    Loss           Interest paid to non-financial- institution lenders
(IRs Art. 37-39)   can only be deductible up to the normal interest
                   rate offered by commercial banks
                   Exchange loss (trading) is tax deductible
 Chapter 2 – Taxable Income
Staff Welfare,     Staff Welfare: deductible up to 14% of total payroll
  Union and        cost
  Training
                   Union expenses: deductible up to 2% of total
  Expenses
(IRs Art. 40-42)
                   payroll cost
                   Staff Training: deductible up to 2.5% of total
                   payroll cost (non-deductible amount can be carried
                   forward for tax deduction in future years)
Chapter 2 – Taxable Income
Entertainment       60% of entertainment expenses actually incurred
     and            in the course of carrying on business is tax
 Advertising        deductible (deductible up to 0.5% of annual
 (IRs Art. 43-44)   revenue)
                    Actual incurred advertising and marketing
                    expenses is tax deductible up to 15% of annual
                    revenue
                    Non-deductible advertising expenses can be
                    carried forward for tax deduction in future years
 Chapter 2 – Taxable Income
Inter and Intra      Management Fees paid between related parties
 Company Fee         are non deductible
(IRs Art. 49 - 50)
                     Rental, royalty, interest etc. paid between
                     operational units within an enterprise are non
                     deductible
                     Overseas head office allocation of expenses (with
                     valid supporting) to its PRC place of business is
                     deductible
Chapter 2 – Taxable Income
  Donation          Donations for public interest is tax deductible (up
(CIT Law Art. 9)    to 12% of the company's annual profits)
 (IRs Art. 51-53)
                    “annual profits” means accounting profits for the
                    year according to the Chinese GAAP
 Chapter 2 – Taxable Income
    Non-            Dividends income from private and listed enterprises
  deductible        and other distributions with respect to equity interests
    Items           paid to investors
(CIT Law Art. 10)   Enterprise income tax payments
                    Surcharge on late tax payments
                    Fines, penalties, and losses incurred through confiscation
                    of property
                    Donations other than donations stipulated in Article 9
                    hereof
                    Sponsorship fees
                    Unapproved provisions
                    Other expenditures not incurred for the purpose of
                    earning income
 Chapter 2 – Taxable Income
Depreciation        Depreciation expenses are not allowed for the
(CIT Law Art. 11)   following fixed assets:
                    – Fixed assets not in use (other than buildings and
                      constructions)
                    – Fixed assets leased in through an operating lease
                    – Fixed assets leased out through a finance lease
                    – Fully depreciated fixed assets that continue to be used
                    – Fixed assets not used in connection with carrying on a
                      business
                    – Land separately valued and recorded as fixed assets
                    – Other fixed assets for which depreciation is not allowed
                      to be deducted
Chapter 2 – Taxable Income
Depreciation       Straight line method
(IRs Art. 59-64)   Residual value: reasonable
                   Useful life:
                     – Housing and buildings: 20 yrs
                     – Aircraft, train, vessels, machineries and other production
                       facilities: 10 yrs
                     – Business related production apparatus, tools and
                       furniture: 5 yrs
                     – Transportation means other than aircraft, train and
                       vessels: 4 yrs
                     – Electronic devices: 3 yrs
                   Production biological assets: 10 yrs for forestry, 3
                   yrs for livestock
 Chapter 2 – Taxable Income
  Intangible        Amortization expenses are not allowed for the
    Assets          following intangible assets:
(CIT Law Art. 12)
                    – Intangible assets that are self-developed and
                      development expenses have been deducted when
                      computing taxable income
                    – Self-developed goodwill
                    – Intangible assets not used in connection with carrying on
                      a business
                    – Other intangible assets for which amortization expenses
                      are not allowed to be deducted
Chapter 2 – Taxable Income
Intangible      Amortization: straight line method
  Assets
(IRs Art. 67)
                Amortization period: not be less than 10 years
                Purchased goodwill arising out of an acquisition of
                entire business or purchase of shares can only be
                deductible at the time when the company transfers
                its entire business or liquidates
   Chapter 2 – Taxable Income
  Long term         Amortization of the following items are tax deductible:
   pre-paid         – Expenses incurred from the reconstruction of fully depreciated
   expenses           fixed assets (amortized over the remaining useful life IRs Art.
(CIT Law Art. 13)     68)
                    – Expenses incurred from the reconstruction of leased fixed
                      assets (amortized over the remaining leasing period IRs Art.
                      69)
                    – Expenses incurred from large-scale renovation of fixed assets
                      (large scale renovation: expenses incurred > 50% of the
                      original tax basis and useful life extended more than 2 yrs;
                      amortized over the remaining useful life IRs Art. 69)
                    – Other expenses that deemed as long-term prepaid expenses
                      (amortization period should not be less than 3 yrs IRs Art. 70)
  Chapter 2 – Taxable Income
    Others          Investment by transferring assets: the costs of the
(CIT Law Art. 14-   transferred assets is not tax deductible
      18)           Trading / Manufacturing: Inventory costs computed
                    in accordance with relevant regulations is tax
                    deductible (may use FIFO, weighted average method
                    or other specific identified method)
                    Asset transfer: net asset value is tax deductible
                    Losses incurred by overseas operating unit is not tax
                    deductible when calculating the corporate income
                    tax on a consolidated basis
                    Tax loss carry forward: 5 years
 Chapter 2 – Taxable Income
   Passive          Dividends and other distributions with respect to
   Income           equity interests, interest, rent and royalty payment
(CIT Law Art. 19)   are taxable on their full amounts
                    Gains on transfers of assets are taxable on the
                    excess of the proceeds over the net value of the
                    assets transferred
                    Other gains, taxable income is to be computed with
                    reference to the methods used above
  Chapter 2 – Taxable Income
Inconsistency       When computing taxable income, tax regulations
(CIT Law Art. 21)   shall prevail in case there is inconsistency between
                    accounting / financial regulations and tax regulations
Chapter 3 - Tax Payable
 Chapter 3 - Tax Payable
Tax Payable         Tax Payable = Taxable Income x Applicable Tax Rate –
(CIT Law Art. 22)   Tax preferential reductions/exemptions – Tax credit

Foreign Tax         An enterprise is allowed to credit its tax payable by the
  Credit            taxes actually paid overseas in the current period on:
(CIT Law Art. 23     – Foreign-sourced income by a resident enterprise;
      -24)           – Foreign-sourced income by a non-resident enterprise
                       effectively connected with its PRC establishments
                    Maximum credit is the tax otherwise payable computed
                    according to this Law
                    Excess amount that cannot be credited in the current
                    period can be offset against tax payable within the
                    following 5 years
 Chapter 3 - Tax Payable
Foreign Tax        Resident enterprise directly or indirectly controlling
  Credit           foreign enterprises with more than 20% of their
(CIT Law Art. 23   shares (IRs Art. 80) is eligible for credits for its
      -24)         proportional share of taxes paid by such controlled
                   foreign enterprises from which it receives foreign-
                   sourced dividends and other distributions with
                   respect to equity interests
Chapter 4 - Tax Incentives
 Chapter 4 - Tax Incentives
 Tax Exempt         Interest income from government bonds
   Income           Dividend income and other distributions with respect
(CIT Law Art. 26)   to equity interests paid between qualified resident
                    enterprises
                    Dividend income and other distributions with respect
                    to equity interests derived from resident enterprises
                    received by a non-resident enterprise in connection
                    with its PRC establishment
                    Qualifying income received by non-profit making
                    organizations
 Chapter 4 - Tax Incentives
 Tax Exempt “Qualified” (IRs Art. 83):
    Income
(CIT Law Art. 26)
                  the non-taxability only applies to dividends arising
                  out of a direct equity investment in another resident
                  enterprise; and
                   such equity investment does not include investments
                   in the listed shares of a resident company if it is held
                   for less than 12 months
 Chapter 4 - Tax Incentives
    Tax             Companies engaged in the following industries can
 Exemption /        enjoy tax exemption/reduction:
  Reduction         – agriculture, forestry, animal husbandry and fishery (full
(CIT Law Art. 27)     exemption or 50% reduction, IRs Art. 86);
                    – major State-supported public infrastructure facility projects
                      (3 years exemption and 3 years 50% reduction, IRs Art. 87)
                    – qualifying environmental protection projects, water or
                      energy saving projects (3 years exemption and 3 years 50%
                      reduction, IRs Art. 88)
                    – Qualified transfer of technologies (exempt up to RMB 5
                      million; 50% reduction for the excess portion IRs Art. 90)
                    – Passive income earned by non-resident enterprises: 10%
                      withholding tax
Chapter 4 - Tax Incentives
Reduced Tax     Qualified small-scale (profit) companies: 20%
   Rate
(CIT Law Art.
                State-encouraged High & New technology
   28-29)       companies: 15%
                Government of autonomous areas may choose to
                reduce or exempt taxes for the portion of tax for
                local distribution paid by an company located in a
                minority autonomous region
Chapter 4 - Tax Incentives
 Qualified      Engaged in non-restricted and non-prohibited
Small-Scale     industries
  (profit)      Industrial Enterprise:
Companies        – Annual Taxable income <RMB 300K
(IRs Art. 92)    – No. of Employees < 100
                 – Total Asset < RMB 30M
                Others:
                 – Annual Taxable income <RMB 300K
                 – No. of Employees < 80
                 – Total Asset < RMB 10M
Chapter 4 - Tax Incentives
High & New       Holding of independent ownership of core intellectual
Technology       properties
 Company         Products/services fall within the scope of State
 (IRs Art. 93)   Encourage High and New Technology
                 Ratio of annual R&D expenditures to the enterprise’s
                 sales shall not be less than the ratio stipulated
                 Ratio of sales (or service) income from High and New
                 Technology products shall not be less than the ratio
                 stipulated
                 % of employees working in the High and New
                 Technology area shall not be less than the ratio
                 stipulated
                 Other criteria stipulated by the relevant authorities
Chapter 4 - Tax Incentives
   Other           Super deduction (IRs Art. 95 - 96)
 Incentives         – 150% on qualified R&D expenditure on new technology, new
(CIT Law Art. 30      products and new techniques
      -31)          – 200% on salaries paid to disabled persons
                   Qualified venture capitalist companies (IRs Art. 97)
                    – if invests in a small-medium High and New Technology
                      enterprise for more than 2 years, 70% of the investment
                      amount can deduct toward the taxable income of the venture
                      capital enterprise for the year when the two-year holding is
                      completed
                    – Where the amount of the deduction is not fully utilized in that
                      year, the unused amount is allowed to be carried forward to
                      the following tax years
 Chapter 4 - Tax Incentives
    Other           Accelerated Depreciation (IRs Art. 98)
  Incentives
(CIT Law Art. 32)
                       Fixed assets affected by advancement in technology
                       or in constant exposure to high tremor and high
                       corrosion)
                       – Shorten the stipulated useful life (shall not be less than 60%
                         of the stipulated life)
                       – Accelerated depreciation method (e.g. double declining
                         balance or sum–of-the-years’-digits method)
 Chapter 4 - Tax Incentives
    Other           Designated Raw Materials (IRs Art. 99)
  Incentives
(CIT Law Art. 33)
                      Income derived from the production of goods by an
                      enterprise which ensures the production of goods in
                      line with State production policies as well as a
                      comprehensive utilization of resources is eligible for
                      deductions against total revenue:
                      – 10% of the revenue derived from such products sales will be
                        recognized as a tax deduction
 Chapter 4 - Tax Incentives
    Other           Investment Tax credit (IRs Art. 100)
  Incentives
(CIT Law Art. 34)
                       Investments in specialized equipment which aid in
                       protecting the environment, conserving water or
                       reducing energy usage or enhancing production
                       safety
                       – 10% of the equipment’s investment cost can credit against
                         the current year’s income tax payable
                       – If credit is not fully utilized, the remaining balance may be
                         carried forward to the following 5 years
                       – Equipment supervisory period: 5 years
Chapter 5 – Tax Withholding
 Chapter 5 – Tax Withholding
   Tax              Companies making payments to non-resident
Withholding         companies with no place of business or
(CIT Law Art. 37    establishment in the PRC should withhold the tax
     & 40)          and report to the tax authorities within 7 days
Withholding         For income tax payable on income derived within
   agent            PRC from engineering contracts and labor services
(CIT Law Art. 38)   by non-resident enterprises, tax authorities may
                    designate the payer of the contracted amount or
                    labor service fee as the withholding agent
Chapter 5 – Tax Withholding
Withholding       Tax authorities may designate the payer as
   agent          withholding agent for engineering contracts and labor
(IRs Art. 106)    services:
                 – where the estimated contract period or period of labor
                   service is less than one tax year, and evidence exists to show
                   that the tax obligation will not be fulfilled;
                 – where tax registration or temporary tax registration has not
                   been performed, and no agent is entrusted in China to
                   arrange the fulfillment of tax obligations;
                 – where an enterprise has failed to file enterprise income tax
                   returns, including provisional filings in accordance with
                   regulatory deadlines
 Chapter 5 – Tax Withholding
 Settlement         If withholding agent fails or be unable to withhold
(CIT Law Art. 39)   income tax at source, the taxpayer shall pay income
                    tax at where the income is derived
                    Should the taxpayer still fail to pay tax, tax
                    authorities have the authority to pursue payment to
                    be made from other income derived within PRC by
                    this taxpayer
Chapter 6 - Special Tax Adjustments
 Chapter 6 - Special Tax Adjustments
  Related          Tax authorities are empowered to make tax
  Parties          adjustments using reasonable methods in case
Transactions       taxpayer’s related parties’ transactions are not
(CIT Law Art. 41   conducted at an arm’s length basis
      - 44)        Arm’s length Cost Sharing Arrangement (e.g.
                   development or transfer of intangible assets, or the
                   provision or receipt of labour services) and
                   Advanced Pricing Agreement with tax authority is
                   allowed
                   Details of related parties transaction are required to
                   be submitted together with the Annual Corporate
                   Income Tax filing
Chapter 6 - Special Tax Adjustments
   Related      Reasonable Methods includes:
   Parties
                 – Comparable Uncontrolled Price Method
Transactions
 (IRs Art. 111)  – Resale Price Method
               – Cost plus Method
               – Transactional Net Margin Method
               – Profit Split Method
               – Others
 Chapter 6 - Special Tax Adjustments
  Related    Required documentations includes:
  Parties      contemporaneous documents in respect of related party
Transactions   transactions such as pricing, standards for determining
 (IRs Art. 114)     expenditures, computation methods, explanatory notes, etc.;
                    documents relating to resale (transfer) price or ultimate sale
                    (transfer) price in respect of the properties, use right of the
                    properties, services of the related party transactions, etc.;
                    information such as product price, pricing method, profit level,
                    etc. that are comparable to the enterprise being investigated,
                    which shall be provided by other enterprises involved in the
                    investigation of related party transactions;
                    Other information in respect of the related party transactions
Chapter 6 - Special Tax Adjustments
   Related      Deemed profit should be derived based on:
   Parties
                 – Profit margin of same type or similar company
Transactions
 (IRs Art. 115)  – Cost plus method
                – Group profit sharing
                – Other reasonable methods
 Chapter 6 - Special Tax Adjustments
  Controlled Profits will be deemed distributing to PRC resident
    Foreign       / resident companies by a foreign subsidiary if:
 Corporation
                     The foreign subsidiary is controlled by resident
   (“CFC”)
                     companies and/or individual resident of PRC and is
     Rules
                     set up in jurisdiction the income tax rate is
(CIT Law Art. 45)
                     significantly lower than 25%; and
                     Without valid commercial reasons, distributes none
                     or lesser profits than it should
                “significantly lower” (IRs Art. 118): an effective tax rate being
                lower than 50% of the PRC corporate income tax rate, i.e., 12.5%
 Chapter 6 - Special Tax Adjustments
    Thin            When the ratio of debt investment and equity
Capitalization      investment that an enterprise receives from its
    Rule            related parties exceeds a specified ratio set forth,
(CIT Law Art. 46)   the portion of interest expense related to debt
                    investment exceeding that ratio shall not be
                    deductible when computing taxable income
 Chapter 6 - Special Tax Adjustments
    Thin       “debt investment”
Capitalization   refer to financing that an enterprise has directly or indirectly
    Rule         acquired from related parties, and the enterprise is required
  (IRs Art. 119)      to repay the principal and make interest payment or financing
                      that requires other compensation of an interest payment
                      nature

                   “equity investment”
                      refer to investments which an enterprise received without
                      being required to repay the principal and make interest
                      payments, while investors have the proprietary rights of the
                      net assets of the enterprise
 Chapter 6 - Special Tax Adjustments
     Tax               Tax bureau has the right to make adjustments based
  Avoidance            on reasonable methods if a company engages in a
   Scheme              business arrangement without bona fide commercial
(CIT Law Art. 47)      purposes that results in reducing or defer its taxable
                       revenue or taxable income
                    “without bona fide commercial purposes” (IRs Art. 120):
                    An arrangement that the primary purpose is to reduce, avoid or
                    defer tax payments
  Chapter 6 - Special Tax Adjustments
   Interest            Underpaid tax as a result of tax adjustment raised by
(CIT Law Art. 48)      the tax bureau will be subject to interest stipulated
                       by the State Council
                    Interest (IRs Art. 121-122):
                    Computed on a daily basis from 1 June following the tax year to
                    which the tax is attributed through the date of tax payment
                    Interest rate will be the RMB lending interest rate (published by
                    the People’s Bank of China) at 1 June following the tax year to
                    which the tax is attributed plus 5%.
                    The 5% can be waived if the company can provide relevant
                    information in accordance with the CIT law and IRs
Chapter 6 - Special Tax Adjustments
Statute of      Tax authorities have the right to make special tax
Limitation      adjustments within 10 years from the tax year when
(IRs Art.123)   the transactions occurred
Chapter 7 - Tax Administration
 Chapter 7 - Tax Administration
    Tax                Tax administration should be exercised in
Administration         accordance with provisions as stipulated in this
(CIT Law Art. 49-56)   Law and the Tax Collection and Administration
                       Law of the People’s Republic of China
                       Consolidated tax filing is required for resident
                       company and its non-legal entity establishments
                       in the PRC
                       Group consolidated tax filing is not allowed
                       Tax fiscal year: January 1 to December 31
                       Provisional tax filing and prepayment should be
                       made on a monthly or quarterly basis (within 15
                       days after the period end)
 Chapter 7 – Tax Administration
    Tax                 Annual tax filing and payment: within 5 months
Administration          after the year end
(CIT Law Art. 49-56)    Tax de-registration: filing performed within 60
                        days upon cessation of business
                        Tax Calculation and Payment: in RMB
                       – Subject to the tax authority’s approval, taxpayer can make
                         provisional tax payments based on average monthly or
                         quarterly taxable income of the last tax year if there is
                         difficulties in ascertaining its profit (IRs Art. 128)
                       – Tax filing is required for company in a loss position (IRs
                         Art. 129)
                       – Exchange Rate: exchange rate as of the last day of the
                         filing period (IRs Art. 130)
Chapter 8 - Supplementary Provisions
 Chapter 8 - Supplementary Provisions
 Grandfather A 5-years grandfather period will be granted to those
  Provision       enterprises established before the promulgation of the
(CIT Law Art. 57) new law (i.e. March 16, 2007)
                   Those enjoying reduced tax rate: gradually increase to 25%
                   from 2008 to 2012
                   Those enjoying tax holiday: continue to enjoy until the end of
                   the preferential treatment period; if the approved tax holiday is
                   not yet commence, year 2008 will be deemed as the tax
                   holiday kick off year
                “established” (IRs Art.131): business registration procedures is
                completed
 Chapter 8 - Supplementary Provisions
 Transitional Transitional Benefits applies to:
   Benefits       State-encouraged new and high technology
(CIT Law Art. 57)
                  companies located within legally-established special
                  zones for the promotion of foreign trade, economic
                  and technological cooperation, and other zones as
                  administered by the State Council
                  Other companies engaged in state-encouraged
                  industries
               Transitional benefits implementation rules will be released by the
               State Council
 Chapter 8 - Supplementary Provisions
International       In case the provisions of a tax treaty/agreement
 Tax Treaty         concluded between the PRC government and a
(CIT Law Art. 58)   foreign government are different from the provisions
                    of the new CIT Law, the provisions of the
                    treaty/agreement shall prevail

								
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