China Tax Administration Guide (9) – Tax Administration and Collection

9.1. Application Time Limits and Requirements

9.1.1. Where an enterprise with foreign investment or a foreign enterprise with an establishment or site in China for production or business operations, moves to a new site, merges with another enterprise, breaks up, winds up or makes a change in any of the main entries of registration, it shall present the relevant documentation to, and go through registration procedures or change or cancellation of its registration with, the local taxation authorities, after the relevant event is registered or a change or cancellation in registration has been made with the Industrial and Commercial Administration Department.

9.1.2. Income Tax on enterprises and local Income Tax shall be calculated on an annual basis and paid in advance in quarterly installments. Such payments shall be made within 15 days from the end of each quarter and the final settlement shall be made within 5 months from the end of each tax year, at which time any excess payment shall be refunded, and any deficiency shall be made up.

(ZHU XI LING [45] 1991.4.9)

9.1.3. Any enterprise with foreign investment or a foreign enterprise with an establishment or site in China for production or business operations shall file its quarterly provisional Income Tax returns with the local taxation authorities within the period for each advance payment of tax, and shall file an annual Income Tax return together with the final accounting statements within 4 months from the end of the tax year.

(ZHU XI LING [45] 1991.4.9)

9.1.4. Enterprises shall go to the local taxation authorities for tax registration within thirty days after the completion of their registration with the State Administration for Industry and Commerce. When an enterprise with foreign investment establishes or terminates a branch outside China, it shall make supplementary tax registration, change of registration or deregistration with the local taxation authorities within thirty days after the establishment or termination.

In going through the registration mentioned in this Article, the enterprises shall submit the relevant documents, licenses and information.

(GUO WU YUAN LING [85] 1991.6.30)

9.1.5. Enterprises shall file their Income Tax returns and final accounting statements with the local taxation authorities within the time limits as stipulated in Article 16 of the Tax Law, whether they make a profit or sustain a loss in that tax year. At the same time as they submit their final accounting statements, enterprises shall also submit audit reports signed by a certified public accountant registered in China, unless otherwise provided by the State.

If an enterprise cannot submit the Income Tax returns and final accounting statements within the time limit prescribed by the Tax Law, due to special reasons, they shall make an application for approval of an extension to the local tax authorities within the filing time limit.

(GUO WU YUAN LING [85] 1991.6.30)

9.1.6. Branches of business establishments shall submit a copy of their final accounting statements to the local taxation authorities at the same time as they submit them to their respective head office, or to the business establishment in charge of consolidated tax filing.

(GUO WU YUAN LING [85] 1991.6.30)

9.1.7. Enterprises that undergo change of address, restructuring, merger, spin-off, termination or change in such major registered items as registered capital or scope of business, etc., shall submit the relevant approval documents to the local taxation authorities for change of registration, or deregistration, within thirty days after the completion of change of registration or before the deregistration with the State Administration for Industry and Commerce.

(GUO WU YUAN LING [85] 1991.6.30)

9.1.8. An enterprise which is merged, divided or dissolved during the year shall, within sixty days, settle the Income Tax liability for that period with the local taxation authorities, when the excess tax payment or tax payment deficiency shall also be settled.

(GUO WU YUAN LING [85] 1991.6.30)

9.1.9. When an enterprise with foreign investment goes through liquidation, it shall file its Income Tax return with the local taxation authorities prior to its de-registration with the State Administration for Industry and Commerce.

(GUO WU YUAN LING [85] 1991.6.30)

9.1.10. When the final due dates for tax filing and tax payment fall on a Sunday or on an official public holiday, the day following the public holiday shall be treated as the final due date.

(GUO WU YUAN LING [85] 1991.6.30)

9.1.11. All Chinese host organizations shall present contracts and other documents to the responsible taxation authorities in places where performances or shows shall be put on within 7 days from the date when the contracts for performances or shows to be put on by foreigners are signed. Those who fail to present contracts within the time limit shall be treated according to the Enterprise Income Tax Law and relevant regulations.

(GUO SHUI FA [106] 1994.4.21)

9.2. Consolidated Filing and Payment

9.2.1. Foreign enterprises which have two or more business establishments set up in China may select one of the establishments for consolidated tax filing and payment. However, that establishment must meet the following requirements:

A. it shall assume the supervisory and managerial responsibility over the business of the other establishments;
B. it shall keep complete accounting records and vouchers that correctly reflect the income, costs, expenses, profits and losses of the other business establishments.

(GUO WU YUAN LING [85] 1991.6.30)

9.2.2. A foreign enterprise which chooses to consolidate its Income Tax filing and payment in accordance with Article 89 of these Rules shall select a business establishment to make such application to the local taxation authorities for examination and then approval according to the following provisions:

A. if all the business establishments involved in the consolidation are located in the same province, autonomous region or municipality directly under the Central Government, the application is subject to approval by the tax authorities of that province, autonomous region or municipality;

B. if they are located in two or more provinces, autonomous regions or municipalities directly under the Central Government, the application is subject to approval by the State Administration of Taxation.

Once the consolidated tax filing and payment of a foreign enterprise is approved, any establishment of new business organizations, merger, change of address, termination, close-down, etc., shall be reported, to the local taxation authorities, by the business establishment in charge of consolidated tax filing, in advance of the occurrence of any of the above situations. Any change in the business establishments involved in the consolidated tax filing shall be treated in accordance with the provisions of the preceding paragraph.

(GUO WU YUAN LING [85] 1991.6.30)

9.2.3. When different tax rates are applicable to different business establishments of a foreign enterprise involved in consolidated tax filing, the taxable income of different establishments shall be calculated separately on a reasonable basis, and Income Tax shall be paid according to the different rates.

When both profit and loss occur in the different business establishments mentioned in the preceding paragraph and there is a net profit after the profits and losses are offset against each other, Income Tax shall be levied at a rate applicable to profit-making enterprises. For those establishments sustaining losses, Income Tax shall be levied at a rate applicable to such establishments when they become profitable after the losses have been made up against the income in subsequent years; Income Tax on the amount of profits which have been used to make up the losses shall be levied at a rate applicable to those establishments which help the losing establishment to make up losses.

(GUO WU YUAN LING [85] 1991.6.30)

9.2.4. When a business establishment in charge of consolidated tax filing cannot accurately calculate the taxable income of different establishments on a separate basis, the local taxation authorities may make a reasonable apportionment of the taxable income among these business establishments, with reference to their respective proportions of income, costs, expenses, assets and the number of staff and workers or the amount of wages.

9.2.5. Income from production and business in Paragraphs 1 and 2 of Article 1 of the Tax Law, refers to income from production and business operations in the manufacturing, mining, transport and communications, construction and installation, agriculture, forestry, animal husbandry, fishing, water conservation, commerce, finance, service industry, exploration and exploitation trades and in other trades.

Other income in Paragraphs 1 and 2 of Article 2 of the Tax Law refers to profits (dividends), interest, rental income, income from the transfer of property, income from the supply or transfer of patents, special technology, income from trademark rights and copyright as well as other non-business income.

(GUO WU YUAN LING [85] 1991.6.30)

9.2.6. Enterprises with foreign investment which establish branches in China shall implement their consolidated tax filing with reference to the provisions of Article 91 and 92 of these Rules.

(GUO WU YUAN LING [85] 1991.6.30)

9.2.7. Income Tax to be paid in advance in quarterly installments, as stipulated in Article 15 of the Tax Law, shall be calculated according to the actual profit for that quarter. Enterprises that have difficulty calculating advance payments based on actual quarterly profit may pay the tax based on one-fourth of the taxable income of the preceding year, or by adopting other formulas approved by the local taxation authorities.

(GUO WU YUAN LING [85] 1991.6.30)

9.2.8. Taxation regarding local Income Tax where the enterprise files the tax in the form of summary or consolidation

According to the Tax Law and the Detailed Rules, Income Tax filed and paid by the enterprise in summary or in consolidation includes Enterprise Income Tax and local Income Tax.

Exemption from and reduction of local Income Tax shall be implemented according to the regulations of the People¡¦s Governments of provinces, autonomous regions or municipalities where the head office of the enterprise or the business establishment responsible for consolidated tax filing is located.

(GUO SHUI FA [165] 1991.10.15)

9.3. Taxation treatment at Merger

Merger refers to two or more enterprises merging into one enterprise according to relevant laws and regulations. If all sides are dissolved first and then merge into a new enterprise, it is referred to as an establishment merger (or dissolution merger); if one side continues to exist while all other sides are dissolved and then merge into the existing side, it is referred to as an absorption merger (or existing merger). No matter what form the merger takes, there is no need for liquidation. The shareholders of the enterprises before the merger (except those investors required to withdraw their shares) shall continue to be shareholders of the new enterprise. The credit and debt before the merger taxation shall be carried out, with the operation activities of the enterprises around the merger regarded as continuing operation activities. If the newly merged enterprise is still recognized as an enterprise with foreign investment according to relevant regulations, the affairs regarding taxation shall be dealt with according to the following principles:

A. Treatment of Asset Valuations

The evaluation of assets, liabilities and stockholder¡¦s equity shall be conducted according to the enterprise¡¦s book historic cost around the merger. The book value is not permitted to be modified according to the value based on the appraisal of the relevant assets carried out particularly for the merger of the enterprise. Adjustments shall be made in one of the following ways when calculating annual taxable income for those new enterprises established by merger who have modified the book value of relevant assets according to the appraised value and on this basis calculated depreciation and amortization:

a. Adjustment by year.

Adjustment in the items regarding cost. etc. declared for annual tax payments by the enterprise shall be carried out for the larger or smaller amount of the cost and expense of the period in the tax year, caused by calculation of depreciation and amortization according to the altered value of the assets. Addition or reduction of taxable income for the period of the tax year shall be carried out correspondingly.

b. Comprehensive Adjustment.

The amount of the altered values of assets shall be evenly divided into ten years in spite of the items of assets, based on which adjustment is made in the items of cost and expense declared annually by the enterprise for tax payments. An addition and reduction of the taxable income shall be carried out correspondingly.

The enterprise shall apply to the responsible taxation authorities for approval of the selection from the above two adjustment methods. The enterprise shall present data and material for calculation to the responsible taxation authorities for examination and verification when conducting the annual declaration of tax payment.

B. Fixed-term Exemption from and Reduction of Tax for Enterprises at Merger

The new enterprise (established by merger) whose production and operation can meet the requirement of the tax incentives regarding fixed term exemption from and reduction of tax according to the tax laws, shall continue to enjoy tax incentives on the basis of the following points:

a. New enterprises shall not continue to enjoy tax incentives if the term for the enterprises before merger to enjoy exemption from and reduction of tax has already ended.

b. New enterprises shall continue to enjoy tax incentives for the remaining part of the term, if the terms for the enterprises before merger to enjoy tax incentives have not come to an end and the remaining parts of the terms are equal in length.

c. New enterprises shall calculate taxable income separately according to the provisions of Section 5 in this article, if the remaining parts of the terms for the enterprises before the merger to enjoy tax incentives are different in length, or some of the enterprises cannot enjoy the exemption from and reduction of tax. The tax incentives shall continue to be enjoyed to the ends of the terms according to the respective taxable incomes of the businesses for which the remaining parts of the terms of tax incentives are different in length from each other. And for the business to which the tax incentives do not apply, tax incentives shall not be granted.

C. Treatment of Tax Rate Reductions

Reduction of tax rates shall be decided, on the basis of the places the enterprises established by merger move in and the industries they are engaged in, for the new enterprises established by merger and their business establishments according to the Tax Law, the Detailed Rules and Regulations and the relevant regulations, and according to actual production and operation. The corresponding taxes shall be paid on the basis of the taxable incomes calculated separately according to Section 5 of this article.

D. Treatment of Previous Period Losses

The unrecovered losses of the enterprises before merger shall be recovered by the new enterprise established by merger annually in the remaining years of the period for which the losses are stipulated to be recovered according to Article 11 of the tax laws. If the new enterprise has set up business establishments in different places where different tax rates are applied, or has carried out various businesses to which different tax rates apply or for which there are different terms for exemption from and reduction of tax, the taxable income shall be calculated respectively according to the provisions in Section 5 of this article. The losses mentioned above before merger shall be recovered from the corresponding income for which the tax treatment is the same as that for the enterprises before merger. Actual recovery shall be carried out with reference to the ways stipulated in Section 2 of Article 91 of the Detailed Rules of the Tax Law.

E. Separate Calculation of Taxable Income

If enterprises engaged in different business, for which tax rates are different or whose remaining part of fixed term tax exemption and reduction are different in length merge into a new enterprise, the new enterprise shall calculate taxable income separately to meet the different requirements regarding taxation according to the provisions in the above sections. The calculation of taxable income shall be carried out in the following ways according to Article 91, Article 92 and Article 93 of the Detailed Rules:

a. If the original enterprises are still appointed as the corresponding business establishments after merger and continue original production or operation business, taxable income may be calculated for each business establishment according to actual income, if the new enterprise established by merger can establish account books respectively and can calculate the taxable income of each business establishment accurately and reasonably.

b. If the original enterprises are not appointed as corresponding business establishments after the merger or although they are appointed as the business establishments, the responsible taxation authorities affirm that the new enterprise fails to calculate accurately or reasonably the taxable income from each business establishment, the taxable income that year shall be calculated separately according to one of proportions of income, costs and expenses, assets, number of employees or amount of wages, or according to the average of several proportions mentioned above. The proportions mentioned above are based on the different business establishments or different businesses for which different tax treatments are adopted. If the above proportions after merger cannot be determined, the proportion may be determined with reference to the data in the last complete tax year or other reasonable period.

(GUO SHUI FA [071] 1997.4.28)

9.4. Taxation treatment at division

Division refers to an enterprise which is divided into two or more enterprises according to the relevant laws and regulations. If the original enterprise is dissolved and the divided sides become separate new enterprises, the division is referred to as an establishment division (also as dissolution division). If the original enterprise continues to exist, while a part of the enterprise is separated from the enterprise and becomes one or more enterprises, the division is referred to as a derivation division (also as an existing division). Whatever form the division takes, there is no need to undergo liquidation procedures. Shareholders of the original enterprise (investors) may continue to be shareholders of all or some of the new enterprises. The credit and debt of the original enterprise shall pass down to the new enterprises based on the division agreements after division through legal procedures.

Taxation shall be carried out with business activities of the enterprises around the division regarded as continuing business activities. If the newly divided enterprises are still recognized as enterprises with foreign investment according to relevant regulations, the affairs regarding taxation shall be dealt with according to the following principles:

A. Evaluation of assets

The evaluation of assets, liabilities and stockholder¡¦s equity shall be conducted according to the enterprise¡¦s book historic cost around the division. The book value is not permitted to be modified according to the value based on the appraisal of the relevant assets carried out particularly for the division of the enterprise. Adjustment shall be made according to the ways stipulated in the previous section “evaluation of assets” regarding the merger of enterprises at calculation and declaration of the annual taxable income for those divided enterprises who have modified the book value of the relevant assets according to the appraised value at calculation of profit and loss. On this basis depreciation and amortization are calculated.

B. Treatment of Tax Incentives

Decisions shall be made on the reduction of tax rates and continuing enjoyment of fixed term tax exemption and reduction, based on the production and operation of the enterprise according to the Tax Law, the Detailed Rules and relevant regulations.

a. The production and business operations of the divided enterprises conforming to the relevant tax incentives according to the Tax Law : if the tax incentive period for the original enterprise does not come to an end at division, the divided enterprises may continue to enjoy the tax incentives to the end of the period. If the tax incentive period for the original enterprise comes to an end at division, all the divided enterprises shall not continue to enjoy the tax incentives. If the production and business operations of the original enterprise do not conform to the relevant tax incentives, while the production and operation business of the divided enterprises conforms to the relevant tax incentives, the divided enterprises may enjoy the tax incentives for the remaining years of the tax incentive period calculated from the first profit making year of the original enterprise.

b. If the production and business operations of the divided enterprises cannot meet the requirements of the relevant tax incentives stipulated in the Tax Law, the enterprises shall not enjoy or continue to enjoy the relevant tax incentives.

C. Treatment of Previous Period Losses

The non-recovered losses of the enterprise before division shall be recovered by the divided enterprises annually in the remaining year of the period for which the losses are stipulated to be recovered according to Article 11 of the Tax Law on the basis of the amount allocated to each divided enterprise in the division agreement.

(GUO SHUI FA [071] 1997.4.28)

9.5. Regulations on Tax Payment on Foreign Currency Income

9.5.1. Income Tax payable according to this Law shall be calculated in Renminbi (RMB). Income in foreign currency shall be converted into Renminbi for purposes of tax payment, according to the exchange rate quoted by the State Exchange Control Authorities.

(ZHU XI LING [45] 1991.4.9)

9.5.2. Exchange rates quoted by the State Administration of Exchange Control in Article 21 of the Tax Law refers to the buying rate quoted by the State Administration of Exchange Control.

(GUO WU YUAN LING [85] 1991.6.30)

9.5.3. For income earned by enterprises in foreign currency, when payment of Income Tax is made in quarterly installments according to the provisions of Article 15 of the Tax Law, taxable income shall be calculated by converting the foreign currency into Renminbi according to the exchange rate quoted by the State Administration of Exchange Control on the last day of the quarter. At the time of final settlement after the end of the tax year, no recalculation or reconversion of the foreign currency need be made for tax which has already been paid on a quarterly basis; only that portion of the foreign currency income of the entire year for which tax has not been paid shall, for calculation of taxable income, be converted into Renminbi according to the exchange rate quoted by the State Administration for Exchange Control, on the last day of the tax year.

(GUO WU YUAN LING [85] 1991.6.30)

9.5.4. Where an enterprise which converted its foreign currency income inot RMB according to the officially quoted exchange rate when paying tax, has excess tax refundable, it shall convert the refundable RMB tax amount into the original foreign currency according to the exchange rate quoted on the day when the tax was first paid, and then convert the sum back into RMB, according to the exchange rate of the day of issue of the tax refund voucher. Where there is a balance of tax payable, the balance of tax payable shall be converted into RMB according to the quoted exchange rate on the day of issue of the tax payment certificate.

(GUO WU YUAN LING [85] 1991.6.30)

9.5.5. The book balance of the capital account, in which the capital received by the enterprise has already been entered, according to the stipulated foreign exchange rate of account, shall not be modified because the unified exchange rate comes into force or because the exchange rate fluctuates.

Adjustment of the balance at the beginning of the year in the enterprises foreign currency account (including foreign currency cash, foreign currency deposit, credit and debt settled in foreign currency) shall be carried out according to the market exchange rate issued on January 1, 1994 by the People’s Bank of China. The balance shall be converted into the balance in the bookkeeping base currency. The difference between the converted balance in the bookkeeping base currency and the original balance shall be listed in a specific item and the calculation of the taxable income of the enterprise shall be carried out in the following ways:

A. If it is net loss, the amortization shall be carried out in the following 5 years from 1994; if the remaining part of the operation period is less than 5 years, amortization shall be carried out in the remaining part of the operation period. If the net loss is so small as not to affect the taxable income of the enterprise for the period, thus considered possible to be amortized in 1994, or the net loss is so large as to be necessary to be amortized in more than 5 years, the responsible taxation authorities shall check and decide after application by the enterprises.

B. If it is net income, amortization shall be carried out in the 5 years, or it may be used to recover the loss annually, and the balance shall be kept as liquidation income in the merged enterprise.

(GUO SHUI FA [107] 1994.4.21)

9.6. Account Books and Documentary Evidence

9.6.1. Any enterprise with foreign investment and any foreign enterprise with establishments or sites in China for production or business operations, shall report its financial and accounting systems to the local taxation authorities for reference purposes. All accounting records must be complete and accurate, with legitimate vouchers as the basis for entries.

(ZHU XI LING [45] 1991.4.9)

9.6.2. Where the financial and accounting principles adopted by an enterprise with foreign investment or organizations or sites established by a foreign enterprise for production or business operations, conflicts with relevant tax provisions of State Council, the tax payment due shall be calculated according to the relevant provisions of State Council.

(ZHU XI LING [45] 1991.4.9)

9.6.3. Unless otherwise provided by the State, enterprises shall keep inside China their account books and accounting records and other supporting documents that enable proper calculation of taxable income.

Vouchers, account books and accounting statements of the enterprises shall be completed in the Chinese language, or in both Chinese and foreign languages. Enterprises using electronic computers for book-keeping shall treat the accounting records in computer storage or output as account books. Magnetic tapes and diskettes shall be kept properly before hard copies are printed.

Vouchers, account books and accounting statements of the enterprises shall be kept for at least 15 years.

(GUO WU YUAN LING [85] 1991.6.30)

9.6.4. Sales invoices and business receipts of the enterprises shall be submitted to the local taxation authorities for approval before they are printed and put into use.

The controlling mechanism over the printing and use of sales invoices and business receipts shall be formulated by the State Administration of Taxation.

(GUO WU YUAN LING [85] 1991.6.30)

9.6.5. All Enterprise Income Tax returns and tax payment certificates shall be printed by the State Administration of Taxation.

(GUO WU YUAN LING [85] 1991.6.30)

9.6.6. If Chinese-foreign equity joint ventures have already converted the earnings in non-standard currency from the economic activities into the standard currency for bookkeeping according to the relevant provisions in the accounting system, regardless of the currency taken as the standard currency for bookkeeping, adjustments shall not be carried out at calculation of taxable income.

Income Tax shall be levied from Chinese-foreign contractual joint ventures, wholly foreign-owned enterprises and the resident representative offices of foreign enterprises with reference to the above provisions.

(CAI SHUI WAI ZI [041] 1987.2.27)

9.6.7. Establishment of well recorded account of payments and receipts by the resident representative office of the foreign enterprise:

The resident representative office of foreign enterprises shall establish well recorded vouchers, receipts and account books regarding business activities, contract signings and payments & receipts. All the records must be correct and complete and shall have legal vouchers as evidence. The resident representative office of foreign enterprises shall present the filed Income Tax return and final accounting statement to the local taxation authorities in the tax year according to Article 36 of the Detailed Rules and Regulations for the Implementation of the Income Tax Law on Foreign Enterprises. In addition, they shall attach the accountant¡¦s report made by an accountant certified in the People¡¦s Republic of China, except where there are other regulations.

(CAI SHUI WAI ZI [197] 1985.9.25)

9.7. Legal Responsibilities

9.7.1. If any taxpayer fails to pay tax within the prescribed time limit, or if the withholding agent fails to remit the tax withheld within the prescribed time limit, the taxation authorities shall, in addition to setting a new time limit for payment, also impose a surcharge for overdue payment equal to 0.2% of the overdue tax for each day the payment is in arrears, starting from the first day the payment became overdue.

(ZHU XI LING [45] 1991.4.9)

9.7.2. The taxation authorities shall set a new time limit for registration or submission of documents and may impose a fine of 5000 yuan or less on any taxpayer or withholding agent who fails to register for tax purposes or to make a change or cancellation in registration with the taxation authorities within the prescribed time limit; who fails to submit an Income Tax Return, final accounting statements or withholding Income Tax Return to the taxation authorities within the prescribed time limit; or fails to report its financial and accounting system to the tax authorities for reference purposes.

Where the taxation authorities have set a new time limit for registration or submission of documents they shall impose a fine of 10000 yuan or less on taxpayers or withholding agents who again to fail to meet the time limit for registering or making a change in registration with the taxation authorities, or for submitting an Income Tax Return, final accounting statements or withholding Income Tax report to the taxation authorities. Where the circumstances are serious, the legal representatives and the person directly responsible shall be investigated for criminal responsibility according to the provisions of Article 121 of the Criminal Law.

(ZHU XI LING [45] 1991.4.9)

9.7.3. Where the tax withholding agent fails to carry out his obligations to withhold tax as provided in this Law, and does not withhold or withholds an amount less than that which should have been withheld, the taxation authorities shall set a time limit for the payment of the amount of tax not withheld, and may impose a fine of up to 100% of the amount of tax not withheld.

Where the withholding agent fails to remit the tax withheld to the State Treasury within the prescribed time limit, the taxation authorities shall set a new time limit for remitting the taxes and may impose a fine of 5000 yuan or less on the withholding agent; if the agent again fails to meet the time limit, the tax authorities shall pursue the taxes according to the law and may impose a fine of 10000 yuan or less on the withholding agent. If the circumstances are serious, the legal representatives and the person directly responsible shall be investigated for criminal responsibility according to the provisions of Article 121 of the Criminal Law.

(ZHU XI LING [45] 1991.4.9)

9.7.4. Where any person evades tax by concealment or deception or fails to pay tax within the time limit prescribed by this Law and, after the taxation authorities have reminded the taxpayer of the payment of tax he again fails to pay it within the prescribed time limit, the taxation authorities shall, in addition to recovering the tax which should have been paid, levy a maximum fine of up to 500% of the amount of tax in default. Where the circumstances are serious, the legal representatives and the person directly responsible shall be investigated for criminal responsibility in accordance with the provisions of Article 121 of the Criminal Law.

(ZHU XI LING [45] 1991.4.9)

9.7.5. In a dispute with the taxation authorities about the payment of tax, any enterprise with foreign investment foreign enterprise or withholding agent must first pay tax according to the relevant regulations. Thereafter, the taxpayer or withholding agent may, within 60 days from the date of receipt of the tax payment certificate issued by the taxation authorities apply to the taxation authorities at a higher level for reconsideration. The higher taxation authorities shall make a decision within 60 after the receipt of the application for reconsideration. If the taxpayer or withholding agent is still not satisfied with the decision, he may institute legal proceedings in the People¡¦s Court within 15 days from the date of receipt of the notification of the decision made after reconsideration of his case.

If the taxpayer concerned is still not satisfied with the decision on the penalties by the taxation authorities, he may, within 15 days from the date of receipt of the notification of the penalty, apply for reconsideration to taxation authorities at the next higher level above that which made the decision on the penalties. Where the party is still not satisfied with the decision made after reconsideration, he may institute legal proceedings in the People¡¦s Court within 15 days from the date of receipt of the decision made after reconsideration. The taxpayer concerned may, however, directly institute legal proceedings in the People¡¦s Court within 15 days after receipt of the notification on penalties. If the party concerned does not apply for reconsideration to the higher taxation authorities or institute legal proceedings in the People’s Court within the time limit, and if the decision on penalties is not fulfilled, the taxation authorities which made the decision on penalties may apply to the People¡¦s Court for compulsory enforcement of their decision.

(ZHU XI LING [45] 1991.4.9)

9.7.6. If any taxpayer or withholding agent fails to accept the examination of the taxation authorities in accordance with the relevant provisions or fails to pay the surcharge for overdue payment within the time limit prescribed by the taxation authorities, the local taxation authorities may, according to the seriousness of the case, levy a fine of up to RMB 5000.

(GUO WU YUAN LING [85] 1991.6.30)

9.7.7. If any enterprise violates the provisions of Article 87, Paragraph 2 of Article 90, Article 95, Article 96, Article 97, Article 99, Article 100 or Article 101 of these Rules, the taxation authorities may, according to the seriousness of the case, impose a fine of up to RMB 5000.

(GUO WU YUAN LING [85] 1991.6.30)

9.7.8. Tax evasion in Article 25 of the Tax Law refers to unlawfully and deliberately carrying out activities in violation of the provisions of the Tax Law, such as altering, forging or destroying bills, accounting vouchers or account books; falsifying or overstating costs and expenses; concealing or understating the amount of taxable income or revenue; evading tax payments; or fraudulently obtaining refund of paid taxes.

(GUO WU YUAN LING [85] 1991.6.30)

9.7.9. The taxation authorities shall serve notices of contravention on the relevant parties in cases involving penalties, in accordance with the relevant provisions of the Tax Law and these Rules.

(GUO WU YUAN LING [85] 1991.6.30)

9.7.10. All units and individuals have the right to provide information and assistance to report offenders or offenses against the Tax Law. The tax authorities shall keep confidential the identity of the informants and reward them according to the relevant regulations.

(GUO WU YUAN LING [85] 1991.6.30)

9.7.11. Surcharges for overdue tax payments from the resident representative office of foreign enterprises who fail to declare and pay tax within the stipulated period Surcharges for overdue tax payments shall be levied from the resident representative office of the foreign enterprise who fails to declare and pay tax within the stipulated period according to Article 15 of the Regulations on Industrial and Commercial Consolidated Tax (draft) and Article 14 of the Income Tax Law on Foreign Enterprises. The surcharge for overdue tax payments shall not be levied from the resident representative office who fails to declare and pay tax within the stipulated period because of special difficulty, after approval by the tax authorities after examination and verification of the reasons given by the resident office, the period for declaration and payment of tax may be extended. Industrial and Commercial Consolidated Tax shall be carried out in the last 10 days, provisionally, to facilitate the calculation of the income by the resident representative office of the foreign enterprises within the period stipulated in the Tax Law, if the resident office really has some difficulty in declaration and payment of Industrial and Commercial Consolidated Tax.

(CAI SHUI WAI ZI [197] 1985.9.25)