Tax-refund: Business tax and tax surcharge of RMB0.7 million for the past three years were refunded to the customer’s bank account on July 15, 2016;

Tax-exemption: The customer enjoyed exemption of value-added tax and additional tax starting from January 2016, subject to an aggregate amount of the taxes to be saved of RMB0.25 million per annum;

- Welcome to our company to inspect the duly tax-exemption approvals issued by the competent tax authority and the customer’s tax-refund certificates!

(1) Customer background

Company name: Shenzhen Office of American T★★Y INC
Time of Incorporation: 2009
Headcount: around 30
Departments established: Technology Department, Procurement Department, Quality Control Department, Administration and Financial Department, etc.
Business operations: Principally purchase various children’s cosmetics and accessories, etc. within China for the headquarter.
Expenditure: Annual expenditure of approximately RMB3 million and the total taxes paid per annum of approximately RMB0.35 million.

(2) Customer’s demand

1). To reduce tax cost:
The headquarter wishes to lower the tax cost of the office in a lawful and safe manner
2). To evaluate the feasibility rapidly:
The person in charge of the Administration and Financial Department had met with financial partners to consult with different departments of the competent tax authority on whether the office could enjoy tax preference, but received no definite replies thereto. Therefore, it was unable to judge on whether there are any applicable tax preference policies;
3). To have a safe and lawful tax preference solution:
The headquarter wishes to enjoy tax preference without changing the existing business operation model of the office. The person in charge of the Administration and Financial Department intends to participate in and understand the process of the communication with the tax authority as well as to understand how BMICS promotes the implementation of tax preference policy.

(3) Risk Analysis

1). Basic necessary expenses of the office (such as rents, utilities, wages, social security fees and running cost reimbursement) are paid by headquarter directly to the domestic business account(s) of the office for transferring to others.
2). A third party is entrusted to file tax returns. The aggregated current expenditure is paid out of monetary funds, and the expenditure is translated into revenue and paid business tax, complementary tax, and corporate income tax.

(1) Assess the feasibility of tax preference
To have a better understanding of the existing operation of the office through on-site investigation and collect the necessary operation-related information concerned by the relevant tax authority (excluding the confidential information in connection with products and techniques);

(2) Assess the most applicable tax preference policy
To organize internal senior advisors for discussion and making a judgement according to the substance of the business, the “replace the business tax with the value-added tax” regulations and the tax code of the office, etc.;

(3) Obtain decision-making support from the office’s management
To assist the American headquarters in understanding legality and compliance of the tax preference proposal, and to supplement and improve tax-related terms in service contracts based on the substance of the business;

(4) Standardize accounting method
To aid in obtaining the headquarter’ support, and to record lawful and valid vouchers which meet the requirements of the domestic regulations by setting up an account book;

(5) Comprehensively implement and promote the tax preference policy
To be responsible for answering questions about approvals handled by related departments of the State Local Taxation Bureau and provide detailed explanation for related information about business operation of the office as well as legal basis and judgment standards of enjoying tax preferences;

(6) Understand and respect for customer demand
In view of legal compliance consideration of the headquarter’s management and for the purpose of making customers at ease, we concur with the person in charge of Administration and Financial Department’s request to participate in the whole process of handling formalities.

5. Customer Evaluation