Circular on Issues Concerning Identification of General Taxpayer of Small-sized Taxpayers Who applied VAT and Whose Sales Exceed Standard in 2009
Guo Shui Han [2010] No. 35

State Administration of Taxation re-enacted the following provisions on March 15, 2010 with respect to issues concerning identification of general taxpayer of small-sized taxpayers who applied VAT and whose sales exceed standard in 2009:

Core Contents:

• Small-sized taxpayer (excluding individually-owned business and private enterprise) whose sales revenue (including the total revenue) exceeds standards should apply for identification procedures of VAT general taxpayers in tax authorities before March 31,2010.

• Individually-owned business and private enterprise whose sales revenue (including the total revenue) exceeds standards should apply for identification procedures of VAT general taxpayers in tax authorities before May 31, 2010.

• Pursuant to “Temporary Rules of VAT of People’s Republic of China” and its detailed regulations, Failure of application within the required period shall pay tax calculated by VAT rate, and shall not deduct input tax, use VAT special invoice, or issue VAT special invoice. If it belongs to Individually-owned business and private enterprise that exceed standards, they will be levied tax upon cancellation of measures of collection at fixed time and with fixed amount, and adopting audit collection measures.

Circular on Issues Concerning Extended Provision of Verification Form of Export Payment of Exchange by Export Enterprises
Yue Guo Shui Han [2010] No. 137

State Administration of Taxation of Guangdong Province specified the following provisions on March 23, 2010 on the issue that extension of verification of export payment of exchange can apply for tax return with other tax documents.

Core Contents:

• Extended verification of export payment of exchange that resulted from extended export payment or network verification system or information transmission that affected by financial crisis, can apply for duty-free of export goods.

• If companies for of Write off deferred exchange earnings intend to refund taxes, they should submit a written explanation to the relevant state tax authorities, including reasons for deferred exchange and timetable for expected exchange, besides, they should ensure the write off of exchange earning within the expected time.

• If the number of write-off deferred exchange earnings is large and with a large amount, tax authorities will focus on examining the authenticity of the business.

Circular on Provisional Measures of Verification Collection of Non-residential Enterprise Income Tax
Guo Shui Han [2010] No. 19

State Administration of Taxation specified the following provisions on February 20, 2010 on issue like approved collection and approved rate adopted by non-residential enterprises.

Core Contents:

• Tax authorities verify profit rate of non-residential enterprises by the following criteria, higher profit rate can be adopted to verify the taxable income in the event that there is evidence to show that the actual profit rate is obviously higher than the following criteria:

• The profit rate for enterprises engaged in contract engineering work, design and workforce consultant is 15% to 30%;

• The profit rate for enterprises engaged in management services is 30% to 50%;

• The profit rate for enterprises engaged in other labor activities or those outside business activities is not less than 15%.

• While selling goods, foreign enterprises also provide facilities, assembly, technical training, guidance and supervision services, tax authorities can verify labor revenue that not less than 10% of total amount of goods sales contract to constitute payable corporate income tax of a standing authority in the event that there is no available chargeable amount or the amount is inappropriate.

• Non-residential enterprises provide labor services both in and outside china at the same time, which are classified as corporate income tax according to areas of labor occurs, valid proof should also be provided when necessary, otherwise, all services provided will be considered happened in china.

Circular on Issues Concerning The Implementation of Enterprise Income Tax Law
Guo shui han [2010] No. 79

On February 22, 2010, pursuant to the regulations in Enterprise Income Tax Law of People’s Republic of China and Implementation Regulations of Corporate Income Tax of People’s Republic of China, specifications on certain problems generated in the process of implementing corporate income tax:

Core Contents:

• When an enterprise encounters debt restructuring, it should be recognized when the debt restructuring contract or agreement is in effect.

• Equity revenue from corporate transfer, should be realized when transfer agreement is in effect and equity change procedure is completed.

• Dividends, bonus and other revenues earned by equity investment shall be recognized at the date when board meeting of invested companies or general meeting of shareholders makes profit distribution or equity transfer decision.

• After putting into use the fixed assets, as the project fee has still not been settled, companies that have not obtained invoices in full could undergo accrued depreciation according to tax calculation basis regulated in the agreement.?

• Before starting production and operation, organizing expenses during the organizing period should not be calculated into current losses.

• Each costs and expenses of corresponding duty-free revenue of an enterprise can be deducted when calculating tax payables of an enterprise (apart from provisions).?

Circular on The Approval of Termination of EIT Preferential Policies towards Foreign Invested Companies
Guo shui han [2010] No. 69

On February 12, 2010, State Administration of Taxation specified that foreign invested enterprises that are shut down for liquidation due to national development scheme does not meet the following conditions to enjoy preferential corporate income tax, and should repay the reduced corporate income tax.

Core Contents：

• Since 2008, companies that inconsistent with the conditions resulting from the change of nature or operating period of a corporate production business should repay the regular reduced tax amount.

• Tax return of direct re-investment of foreign investors’ profits

  For profits earned by foreign-invested companies and profits earned by foreign investors from foreign-invested companies directly engaged in domestic re-investment,40% tax amount of paid corporate income tax of the re-investment could be returned, in the event that the re-investment withdraw within 5 years, the refund amount should be paid.

Effective from March 1,2010