General Regulations of P. R. China XV

Article 1 All units and individuals engaged in the production, subcontracting for processing or the importation of consumer goods prescribed by these Regulations (hereinafter referred to as 'taxable consumer goods') within the borders of the People's Republic of China are taxpayers of Consumption Tax (hereinafter referred to as 'taxpayers') and shall pay Consumption Tax in accordance with these Regulations.

Article 2 The taxable items, tax rates (tax amounts) of Consumption Tax shall be implemented in accordance with the "Consumption Tax Taxable Items and Tax Rates (Tax Amounts) Table" attached to these Regulations.

Any adjustments to the Consumption Tax taxable items, tax rates (tax amounts) shall be determined by the State Council.

Article 3 Where taxpayers deal in taxable consumer goods with different tax rates, the sales amounts and sales volumes for the taxable consumer goods shall be accounted for separately. If the sales amounts and volumes are not accounted for separately, or if the taxable consumer goods subject to different tax rates are combined into a whole set of consumer goods for sales, the higher tax rate shall apply.

Article 4 Taxable consumer goods produced by the taxpayer shall be subject to tax upon sales. For self-produced taxable consumer goods for the taxpayer's own use in the continuous production of taxable consumer goods, no tax shall be levied; tax shall be assessed when the goods are transferred for other use.

Where taxable consumer goods are contracted processed, the tax shall be collected and paid by the contractor upon delivery to the taxpayer. Where contract processed taxable consumer goods are used by the taxpayer for the continuous production of taxable consumer goods, the tax paid can be credited in accordance with the regulations.

Imported taxable consumer goods shall be subject to tax upon import declaration.

Article 5 Consumption Tax payable shall be calculated using the ad valorem method or the specific value method. The formulas for calculating the tax payable are as follows:

Using the ad valorem method to calculate tax payable amount of tax = Sales amount x Tax rate.

Tax payable calculate using the specific value method amount of tax = Sales volume x Tax amount per unit.

Where the sales amount of taxable consumer goods are calculated in foreign currency, the taxable amounts shall be converted into Renminbi according to the exchange rates prevailing in the foreign exchange market.

Article 6 The "sales amount" as stipulated in Article 5 of these Regulations shall be the total price plus other costs received by the taxpayer, from the purchasing party, for the taxable consumer goods sold.

Article 7 Self-produced taxable consumer goods for the taxpayer's own use and subject to tax in accordance with the stipulations of Paragraph 1 in Article 4 of these Regulations, shall be assessed according to the sales price of similar consumer goods produced by the taxpayer. If the sales price of similar consumer goods is not available, the tax shall be assessed according to the composite assessable value. The formula for calculating the composite assessable value is as follows:

Composite assessable value = (Cost + profit) % (1-Consumption Tax rate)@@page@@

Article 8 Contract processed Taxable consumer goods shall be assessed according to the sales price of similar consumer goods of the contractor. If the sales price of similar consumer goods is not available, the tax shall be assessed according to the composite assessable value. The formula for calculating the composite assessable value is as follows:

Composite assessable value = (Cost of material + Processing fee) % (1 - Consumption Tax rate)

Article 9 Where taxable consumer goods adopt the ad valorem method for calculating tax payable, they shall be assessed according to the composite assessable value. The formula for calculating the composite assessable value is as follows:

Composite assessable value = (Customs dutiable value + Customs Duty) % (1 - Consumption Tax rate)

Article 10 Where the taxpayer uses a price, in calculating tax on taxable consumer goods, which is clearly too low and without proper justification, the responsible tax authorities will determine which price he will use in calculating tax.

Article 11 Where taxpayers export taxable consumer goods, the Consumption Tax will not be levied, unless otherwise determined by the State Council. The procedures for exemption of exported taxable consumer goods shall be regulated by the State Administration for Taxation.

Article 12 Consumption Tax shall be collected by the tax authorities. Consumption Tax on the imported taxable consumer goods shall be collected by the Customs Bureau on behalf of the tax authorities.

Where taxable consumer goods are brought or mailed into China by individuals, the Consumption Tax shall be levied together with Customs Duty. The detailed measures shall be formulated by the Tariff Policy Committee of the State Council together with the relevant departments.

Article 13 Where taxpayers sell taxable consumer goods and self-producing taxable consumer goods for their own use, unless otherwise as determined by the State, they shall report and pay tax to the local responsible tax authorities with jurisdiction over the taxpayers.

Where taxable consumer goods are contract processed, the Consumption Tax due shall be paid to the local responsible tax authorities where the contractors are located.

Where taxable consumer goods are imported, the tax shall be reported and paid by the importers or their agents to the customs offices where the imports are declared.

Article 14 Time limits on payment of Consumption shall be one day, three days, five days, ten days, fifteen days or one month. The actual time limits of the taxpayers shall be separately determined by the responsible tax authorities according to the amount of the tax payable of the taxpayers; tax that cannot be assessed in fixed time limits can be assessed on a transaction-by-transaction basis.

Taxpayers that adopt one month as their time limit shall report and pay tax within ten days following the end of the period. If a time limit of one day, three days, five days, ten days or fifteen days is adopted, the tax shall be prepaid within five days following the end of the period, and a monthly return shall be filed with any balance of tax due settled within ten days from the first day of the following month.

Article 15 Where taxpayers import taxable consumer goods, they shall pay tax within seven days after the completion and issuance of the tax payment certificates by the Customs Bureau.

Article 16 The collection and administration of Consumption Tax shall be implemented in accordance with the relevant regulations of the (Law of the People's Republic of China on Tax Collection and Administration) and these Regulations.

Article 17 The collection of Consumption Tax from enterprises with foreign investment and foreign enterprises shall be implemented in accordance with the resolutions of the Standing Committee of the National People's Congress.

Article 18 The present Regulations are interpreted by the Ministry of Finance and the Detailed Rules are formulated by the Ministry of Finance.

Article 19 These Regulations are effective as of January 1, 1994. The relevant regulations of the "State Council Concerning Collection of Consumption Tax" in effect before the present Regulations, are annulled at the same time.

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