Guide for Taxpayers in Shanghai Ⅳ

I. Tax Concession Based on the Categorization of Tax Items
 
(I). Deduction and Exemption of VAT

　A. Non Scheduled Items for Tax Exemption:

　　1. Self-produced raw agricultural products sold by organizations or individuals engaged in farming, aquatics breeding, forestry, animal husbandry, and fishery;

　　2. Contraceptive medicine and appliances;

　　3. Antique and used books collected from the public;

　　4. Imported instruments and equipment which are used directly in scientific researches and experiments and teaching;

　　5. Imported goods and equipment donated by foreign governments and international organizations;

　　6. Imported equipment for such ways of trade as “processing with supplied ”, “assembling with supplied ” and compensation trade;

　　7. Special imported goods for the handicapped, the importation being organized directly by the handicapped;

　　8. Second-hand goods sold by individual owners, which had been used by individuals themselves (except for barges, motorcycles or automobiles);

　　9. Other fixed assets belonging to goods sold by their owners (organizations and individual operators), which had been used by themselves (except for barges, motorcycles or automobiles);

　　10. Processing, repairing and maintaining services provided by handicapped individuals;

　　11. Enterprises dealing with grains:

·Grains supplied by state-owned grain purchasing and selling enterprises;

·Grains sold by other grain enterprises to the army, relocated people from reservoirs, and for such purposes as relieving disasters;

　　12. Construction materials made from products as a result of comprehensive uses of resources;

Foreign invested enterprises purchasing equipment

　　13. made in China can enjoy tax rebates: @@page@@

　　　(1). Foreign invested enterprises that enjoy China-made equipment purchasing tax rebate refer to the enterprises that have went through tax registration, including Chinese-foreign joint ventures, Chinese-foreign co-operative enterprises and foreign funded enterprises.

Foreign invested capital of foreign invested enterprises must account for over 25% (including 25%) of the enterprises’ capital that are in position.

Foreign invested enterprises in Shanghai who haven’t obtained the Tax Rebate(Tax Exemption) Registration Certificate of Export Goods should go through tax rebate (tax exemption) registration in administrative offices for import and export taxation before their first purchasing according to the first China-made equipment purchasing contract. Only after enterprises’ obtaining the Tax Rebate (Tax Exemption) Registration Certificates of export goods, can they apply for the registration for file of purchasing equipment made in China.

　　　(2). The scope of the equipment that can enjoy tax rebate: equipment purchased in China that are in accordance with the investment items in the Guide Catalogue of Foreign-investment Industries (the “encouragement category” and the “No. 2 restriction category”), that is prescribed in the Notice from The State Council on Adjusting Taxation Policies of Importing and Exporting Equipment (China (97) No. 37) .

Equipment that is purchased in China and listed in the Category of None Tax Exemption Imported and Exported Goods of Foreign-Investment Items and the Category of None Tax Exemption Imported and Exported Goods of Domestic-Investment Items can not enjoy tax rebate.

　　　(3). Equipment that can enjoy tax rebate should satisfy the following two conditions:

·It should be un-used equipment made in China and purchased by currencies, excluding investments in kind and intangible asset investments;

·It should be purchased after September 1, 1999 and within the tax rebate amount verified by taxation authorities;

　　　(4). the amount of tax rebate of purchasing equipment made in China = Sum in special VAT Invoices × applicable VAT rates

　　　(5). China-made equipment purchased by foreign invested enterprises is supervised and administrated by taxation authorities in charge of tax rebate with a period of 5 years. During this period, if the equipment is transferred, given away, leased or re-invested, enterprises should pay tax that has been rebated.

　B. Scheduled Items for Tax Exemption

Scheduled items for tax exemption are in accordance with items publicized by the State Council and SAT.

　C. Tax Rebate/exemption for Exported Goods

　　1. The amount of rebate of VAT is computed according to the input tax of VAT. The detailed information is as follow:@@page@@

Foreign trade, industrial trade and other import/export enterprises should compute tax rebate according to the input tax and tax payable listed in special VAT invoices of goods purchased for export. To those enterprises that compute inventory and distribution through the method of weighted mean, the following computing formula is adapted:

tax rebate amount = exported goods × average purchase price × tax rebate rate

For those exported goods purchased from small-scale taxpayers and approved to enjoy tax rebate policy in particular, the input tax should be computed according to the following formula :

input tax amount = [sales volume listed in general invoices (including VAT) / (1 + percentage rate)] × tax rebate rate

The input tax payable of other exported goods can be computed according to the amount of VAT listed in special VAT invoices.

　　2. For goods exported by manufacturing enterprises themselves (including new foreign invested enterprises) or through commission by other foreign trade enterprises, the calculation methods for tax exemption, tax credit and tax rebate are as follow:

Tax exemption is applicable to those self-produced goods exported by enterprises themselves or through commission by foreign trading enterprises; the VAT of production and sales links of these enterprises can be exempted. Tax credit means that the VAT paid for raw materials and accessories of self-produced goods exported by manufacturing enterprises themselves or through commission of foreign trade enterprises can be credited from the VAT payable for goods sold within the country. Tax rebate is applicable to those enterprises whose sales volume of exported goods (exported by enterprises themselves or through commission of foreign trade enterprises) is over 50% (including 50%) of the overall sales volume of the period, and the amount of credited tax is larger than the tax payable, within one quarter. With the approval of taxation authorities in charge, the remaining amount (tax that is not credited) can be rebated. And if the sales volume of exported goods (either exported by enterprises themselves or through
commission) is less than 50% of the overall sales volume for the period, tax that has not been credited is transferred to the following business period.

With the approval of municipal administration of state taxations, tax exemption, tax credit and tax rebate can also be applicable to the following types of enterprises: domestic enterprises with Import/export licenses, and foreign invested enterprises and manufacturing groups that have gone through import and export business.

Import and export departments (branch companies) inside manufacturing enterprises with Import/export licenses and domestic manufacturing groups can also enjoy tax exemption, tax credit and tax rebate.

Independent Import/export enterprises organized by manufacturing groups, that purchase goods produced by other departments (enterprises) within the groups and export these goods to foreign countries are defined as Industry and Trading Companies. These companies can not enjoy the tax exemption, tax credit and tax rebate.

For those manufacturing enterprises and groups without Import/export licenses, if they consign foreign trade companies or Industry and Trading Companies to export their products, they can get tax rebate by way of “pay-first-rebated-later”.@@page@@

　　3. The rebate of consumption tax of the exported goods of foreign trading companies, Industry and Trading Companies should be computed according to the purchasing rate on which basis the consumption tax is calculated when the above enterprises purchased these goods from factories, if consumption tax is ad valorem. The rebate of consumption tax should be computed according to the quantity they purchased and declared to the Customs, if consumption tax is collected through specific value method. The tax rebate formula is as follow:

tax rebate = sales volume of the export factory (exported amount) × tax rate (tax payable per unit)

Consumption tax of the manufacturing enterprises with export licenses can enjoy tax exemption according to the actual sales volume of exported commodities.

If the sales volume, the input tax and the tax payable of exported goods are unreasonably high, taxation authorities can revoke these enterprises of rights to enjoy tax rebate and tax exemption.

 (II). Deduction/exemption of Consumption Tax

Taxpayers export taxable consumables need not pay consumption tax.

 (III). Deduction/exemption of Business Operation Tax

Main items exempted from business operation tax:

　　1. Nursing service provided by nurseries, kindergartens, homes for the aged, welfare institutions for the handicapped and matchmaking and funeral services;

　　2. Services provided individually by the handicapped;

　　3. Incomes of non-profit medical institutes on medical services based on related state regulations are exempted from business operation tax. Incomes of profit-making medical institutes on medical services are exempted from business operation tax within three years starting from the date the institutes obtain business licenses;

　　4. Educational services supplied by regular schools and other types of educational institutes whose establishment are approved by municipalities above the city level or educational administrative organizations at the equivalent level and, the diplomas of whose graduates are acknowledged by the state; and services provided by students who participate in work-study programs;

　　5. Agricultural machine ploughing, irrigation and drainage, prevention and treatment plant diseases and insect pests, protection of plants, insurance for farming and animal husbandry and related technique training services, the breeding of, and the prevention and treatment of diseases in poultry, livestock and aquatic animals;

　　6. Admission fees charged for cultural activities held by memorial halls, museums, culture centers, art galleries, exhibition halls, academies of painting and calligraphy, libraries and cultural protection units; admission fees charged for cultural and religious activities held at places of religious worship;

　　7. Incomes of transference of individual copyright;@@page@@

　　8. Incomes of organizations’ and individuals’ technique transference, technique development and related consultation, technique services;

　　9. Where land use rights are transferred to an agricultural producer to use in agricultural production;.

　　10. The taxable services supplied for the teaching and researching activities of their own schools by qualified enterprises held by the schools(excluding hostels, catering and entertainment industry) are exempted from tax for the time being;

　　11. Business within the taxable scope of service industries (excluding advertisement industry) of the qualified civil welfare enterprises where handicapped employees are over 35% of the whole amount of employees are exempted from tax for the time being;

　　12. The insurance fee income earned by insurance companies on one year or more period repaid life insurance business (normal life insurance, old age income insurance and health insurance).

　　13. Individuals selling their own normal houses are exempted from business operation tax;

　　14. Incomes of selling houses by enterprises and administrative institutions to their employees at the cost prices and standard prices according to the Housing Reform are temporarily exempted from business operation tax.

 (IV). Main Items of Deduction/exemption of Corporate Income Tax:

　A. Tax Deduction/exemption for Employment Service Enterprises

Enterprises with over 60% employees newly recruited within a year and who are jobless young people, laid off employees, unemployed people, people whose residential permission change from rural area to urban area and people released from prisons (referred to as “redundant labors” in the following paragraphs), after being approved and categorized as employment enterprises, can be exempted from corporate income tax for 3 years. In the year following the expiration of the exemption, if over 30% of the employees are new recruits from the unemployed, these enterprises can pay half of the normal amount of corporate income tax for 2 years.

　B. Tax Exemption and Deduction for Civil Welfare Enterprises.

For civil welfare manufacturing enterprises of which over 35% employees are categorized as “four kinds of handicapped people”, corporate income tax can temporarily be exempted. For those enterprises of which over 10% but less than 35% of employees are the handicapped, half of corporate income tax is deducted.

The “four kinds of handicapped people” are the blind, the deaf, the dummy and the body handicapped.

　C. Corporate Income Tax Concessions for Enterprises in the Third Industry.

For newly founded independent enterprises and operation organizations engaging in the business of consultation, information and technology services, the corporate income tax is exempted for two years since the day they start their business.@@page@@

For newly founded independent enterprises or operation organizations in public services, commerce, material industry, foreign trade, tourism, storage industry, community services, catering industry, education and cultural services, health and medi-care, corporate income tax is exempted or reduced for one year since the day they start their business.

In case of enterprises established for the purpose of helping family members of service personnel settle down, their corporate income tax is exempted for three year since the day they obtain their tax registration certificate.

　D. Tax Concessions for Hi-Tech Enterprises

For hi-tech enterprises recognized by the Shanghai Science Committee and located in hi-tech development zones approved by the State Council, corporate income tax is paid at the rate of 15%.

Newly established hi-tech enterprises in hi-tech development zones that are approved by the State Council are exempted from corporate income tax for the first two years since the day the enterprises put into production.

　E. Tax Concessions for the Comprehensive Utilization of Resources.

Besides products originally planned by enterprises, the income of products of which raw materials come from resources begot in production processes and are within the Catalogue of Resources Comprehensive Utilization can be exempted from corporate income tax with a period of five years since the beginning of production or operation.

Enterprises that produce construction materials with coal cinder, baring powder coal as raw materials can enjoy income tax exemption for the first five years of business operation.

Enterprises that aim to utilize comprehensively resources wasted or abandoned by other enterprises, and that are listed within the Catalogue of Resources Comprehensive Utilization, can enjoy tax exemption or deduction for one year .

For enterprises that produce equipment and products listed in the Category of Environmental Protection Products / Equipments Encouraged by the State and their independent branches, workshops, of which annual net income is below 300,000 RMB, corporate income tax is exempted for the time being. Enterprises that use China-made products or equipment listed in the Category of Environmental Protection Products / Equipments Encouraged by the State can adopt the method of accelerated depreciation, after their applications are approved by taxation authorities.

　F. Tax Concessions for Enterprises Affiliated to Schools

For enterprises affiliated to universities, secondary schools or elementary schools, corporate income tax can be deducted or exempted with the approval of the tax administration.

The income of university service center is exempted from paying corporate income tax for the time being.

　G. Corporate Income Tax Credit on Domestic Made Equipment for the Purpose of Technology Renovation@@page@@

As for investments within China on technology renovation on the basis of state industrial policies, 40% of investments of domestic made equipment needed by the renovation can be credited from the extra amount of corporate income tax in the investment year higher than that of the previous year.

The annual amount of credited tax cannot exceed the extra amount of corporate tax payable, compared with that of the year before investment. If the extra amount of corporate tax payable is insufficient for tax crediting, the remaining amount that has not been credited can be passed down to the following years (no more than 5 years) for crediting.

　H. Tax Concessions for the Software Industry and the Integrated Circuit (IC) Industry

As for newly founded and recognized enterprises in the software industry and the IC industry within China, corporate income tax is exempted for the first two years and reduced to 50% for the following three years since the year they earn profit. For key software enterprises within the state plan, corporate income tax is collected at the rate of 10% if these enterprises do not enjoy tax exemption in the present year.

When approved by taxation authorities in charge, the depreciation term of IC enterprises can be reduced, the bottom line is 3 years.

 (V). Tax Deduction/exemption for Enterprises with Foreign Investment and Foreign Enterprises.

　A. Enterprises with foreign investment of a production nature can enjoy the following tax concessions policies:

　　1. The following enterprises with foreign investment of a production nature scheduled to operate for a period of not less than 10 years shall, from the year in which it begins to make profits, be exempted from income tax in the first and second year and allowed a 50% reduction in the third to fifth years: enterprises of a production nature engaged in machinery manufacturing, electronic industry, energy industry (excluding exploitation of oil and natural gas), metallurgy (excluding exploitation of rare and valuable metal), chemical, construction material industry, light industry, textile, packaging industry, medical appliances, pharmaceutical industry, agriculture, forestry, livestock husbandry, fishery, water conservancy, construction industry, transportation industry (excluding passenger transportation); service industries which directly provide services for production, such as technique development, geological survey, consultation of industry information and maintaining industry for production equipment a
nd refined instruments; other enterprises with foreign investment (e.g. enterprises engaged in construction, installment and fixing designs, enterprises supplying labor services, breeding, breed aquatics, planting, production technique research and development for engineering items, enterprises that supply transportation and storage for the clients with their own transportation vehicles and storage equipment). If the above enterprises’ actual operation period is less than 10 years, they should repay the tax which have been exempted or deduced.

　　2. Any enterprise with foreign investment which is engaged in agriculture, forestry or animal husbandry and any other enterprise with foreign investment which is established in remote underdeveloped areas may, upon approval of SAT of an application field by the enterprise, be allowed a 15% to 30% reduction of the amount of income tax payable a period of ten years following the expiration of the period for tax exemption or reduction mentioned above.

　　3. Chinese-foreign equity joint ventures engaged in the construction of harbors and docks shall pay corporate income tax at the rate of 15%. And those enterprises scheduled to operate for a period of not less 15 years , from the year in which it begins to make profit, shall be exempted from corporate income tax from the first to the fifth years and allowed 50% reduction from the sixth year to the tenth years upon approval of the joint venture’s application by the state tax authorities at the province level.@@page@@

　B. Export-oriented and technologically advanced enterprises with foreign investment can enjoy the following tax concessions policies:

　　1. Export-oriented enterprises with foreign investment may, upon the expiration of the tax exemption and reduction period as provided for in the Tax Law, enjoy a further 50% reduction in corporate income tax based on the rate stipulated by the Tax Law, if the value of their exported products of the year exceeds 70% of the total value of their products of the year. But for the enterprises who have already enjoyed the 15% rate of corporate income tax according to relevant regulations, they shall pay income tax at the rate of 10%.

　　2. Technologically advanced enterprises with foreign investment may, upon the expiration of the corporation income tax exemption and reduction period as stipulated by the tax law, enjoy a further 50% reduction for another three years based on the rate stipulated by the tax law, if they remain technologically advanced enterprises.

　C. Enterprises with foreign investment and foreign enterprises located in special economic zones (special economic zone of Shenzhen, Zhuhai, Shantou, Xiamen and Hainan), economic and technological development zones (zones that have been approved by the State Council in coastal and harbor cities), coastal economic open zones (cities, counties, districts that have been approved by the State Council as coastal economic open zones) and new technique industrial development zones etc. can enjoy the following tax concessions.

　　1. The income tax on enterprises with foreign established in special economic zones, foreign enterprises that have establishments or sites in special economic zones engaged in production or business operations, and enterprises with foreign investment of a production nature in economic and technological development zones shall be levied at the rate of 15%.

　　2. The income tax on enterprises with foreign investment of a production nature established in coastal economic open zones, old urban districts of cities where the special economic zones or the economic and technological development zones are located, or opening cities and tourism and vacation districts approved by the State Council shall be levied at the reduced rate of 24%.

　　3. The income tax on enterprises with foreign investment in coastal economic open zones, old urban districts of cities where the special economic zones or the economic and technological development zones are located, engaged in technology-intensive and knowledge-intensive projects, projects with an investment of over 30 million USD and a long period of investment retrieving, and projects of energy, communications, harbor construction shall be levied at the reduced rate of 15% after the approval of SAT.

　　4. Foreign banks, banks with Chinese and foreign joint investment and other financial institutions established in the special economic zones and other areas approved by the State Council, with the capital put up by the foreign investor or operating funds appropriated by the head office totaling 10 million USD or more, and with the period of operation exceeding ten years may pay the corporate income tax at the rate of 15%. In the meantime, they may, from the year in which it begins to make profit, be excepted for the first year and allowed 50% reduction for the second and third years upon approval of their application by the local taxation authorities.@@page@@

　　5. Enterprises with foreign investment recognized as new and high-technology enterprises, which are established in the New and Hi-tech Industrial Development Zones approved by the State Council, shall pay income tax at the reduced rate of 15%. For those scheduled to operate for a period of not less than 10 years may, from the year in which it begins to make profit, enjoy exemption from Income Tax for two years upon the approval of enterprise’s application by the local tax authorities in charge.

　　6. Enterprises with foreign investment established in special economic zones and engaged in service industries, and with a foreign investment exceeding 5 million USD and the operation period exceeding 10 years may, upon approval of their applications by the relevant special economic zone taxation authorities, enjoy tax exemption for the first profit-making year and reduction in income tax by 50% for the second and third year.

　D. Foreign investors and foreign enterprises can enjoy the following tax concessions:

　　1. Profits derived by a foreign investor in an enterprise with foreign investment shall be exempted from corporate income tax;

　　2. Any foreign investor of an enterprise with foreign investment which reinvests its share of profit from the enterprise directly into that enterprise by increasing its registered capital, or which use the profit as capital investment to establish other enterprises with foreign investment to operate for a period of not less than 5 years shall, upon approval by the tax authorities of an application field by the investor, be refunded 40% of the corporate income tax paid on the reinvested amount. If they invest to expand or set up Import/export enterprises or hi-tech enterprises with a operation period of not less 5 years, they shall be refunded all the corporate income tax paid on the reinvested amount. If the investor withdraws his reinvestment before the expiration of a period of 5 years, he shall repay the refunded tax.

　　3. Income from interest on loans made to Chinese state banks by foreign governments and foreign banks shall be exempted from corporate income tax.

　　4. Income Tax on royalties received for the supply of technical know-how in scientific research, exploitation of energy resources, development of communication industries, agriculture, forestry and animal husbandry, and the development of important technology may, upon approval by SAT, be levied at the reduced rate of 10%. Where the technology supplied is advanced or the terms are preferential, exemption from income Tax may be allowed.

　　5. Foreign enterprises that obtain dividends, interest, rentals, royalties and other sources from special economic zones, economic and technological development zones and urban areas of open cities shall pay corporate income tax at the rate of 10%, besides tax exemption. The municipal People’s Government shall make decisions on more favorable tax exemption and reduction for foreign enterprises who provide capital or equipment on terms preferential to China or who transfer advanced know-how.

With effect from January 1, 2001, those foreign enterprises which has no establishment or site in China but derives profits, interest, rental, royalties or other income from sources in China, or which, though it has an establishment or site in China and derives such income which however is not effectively connected with such establishment or site, shall pay an income tax of 10% on such income.

　　6. Offset technology development expenditure from taxable income: With effect from January 1, 2001, for those enterprises with foreign investment whose technology development expenditure incurred in China increases more than 10% (including) in real terms over that of the previous year, a further amount equal to 50% of the technology development expenditure used for purchasing China-made equipment may be offset the taxable corporate income of the year.@@page@@

　　7. Corporate income tax credit for investment in the form of purchasing China-made equipment: With effect from July 1, 1999, for those enterprises with foreign investment based in China, up to 40% of investments in domestic-made equipment, which fall into the “Encouraged” and “Limited B” categories of Guided Industries Catalogue for Foreign Investors in Notice of the State Council on Adjusting Taxation Policies for Importing Equipment (G.F. [1997] No37) (except for those listed in the Catalogue of Imported Commodities in Foreign Invested Projects not Entitled to Tax Exemption in (G.F. [1997] No37)), can be credited in the same year to the amount of corporate income tax increased over that of the previous year.

　E. For those activities and projects that are encouraged to be invested by foreign funds, governments of each province, municipality and municipality directly under the Central Government can decide, according to the actual situation, the deduction/exemption of the local part of corporate income tax on enterprises with foreign investment and foreign enterprises.

 VI) Deduction/exemption of Individual Income Tax

　A. Main Items of the Exemption of Individual Income Tax:

　　1. Bonus for science, education, technology, culture, sanitation, physical training and environment protection issued by institutions at the level above provincial government, department of the State Council, corps of the army, and foreign and international organizations;

　　2. Interest of the bond issued by the Ministry of Finance and financial bond issued with the approval of the State Council;

　　3. Special government allowance and tax-free allowance issued according to the regulations of the State Council;

　　4. Welfare fee, pension and social aids;

　　5. Insurance indemnity;

　　6. Fee of demobilization for the servicemen when transferred to civilian work;

　　7. Fee for settlement, quitting work and retirement to the cadres and employees according to the uniform regulations of the State;

　　8. Tax-free income indicated in international covenants and agreements that the Chinese Government has signed;

　　9. Other tax-free income approved by financial departments of the State Council;

　　10. Income from stock jobbing is temporarily exempted from tax;

　　11. The prize less than 10,000 RMB at one time, won by individuals in a sports lottery .@@page@@

　B. The deduction of individual income tax can be applied to the following items with the approval of provincial government:

　　1. Income of the handicapped, the old widows/ widowers and dependents of martyrs;

　　2. Persons who suffer serious lose from serious natural disaster;

　　3. Other deduction with the approval of finance departments of the State Council.

 (VII) Deduction/exemption of Resource Tax

　A. Crude oil used for heating and fixing wells during the process of exploitation of crude oil;

　B. Taxpayers who suffer serious lose because of accidents or natural disasters during the exploitation or producing of the non tax-free products can be exempted or deduced from tax with the approval of provincial governments;

　C. 40% of resource tax of iron mine can be reduced for the independent mines;

　D. Items of tax exemption/deduction indicated by the State Council.

 (VIII) Deduction/exemption of Land Appreciation Tax.

　A. The local taxation authority can approval the Land Appreciation Tax exemption application for the following items:

　　1. Building ordinary standard houses for sale of which the value added part is within the deductible limit 20% ;

　　2. Real estate being confiscated or taken back for the need of city planning or civil constructions;

　　3. Real estate transferred by taxpayers themselves for the need of city planning or civil constructions;

　　4. Individuals who transfer residential houses because of job shifts or improving residential conditions can be exempted from the tax if these individuals have lived in the original houses more than five years, or pay half the tax if less than five years but more than three years.

　B. The land appreciation tax of the following items are temporarily exempted:

　　1. The transferred real estate used as equity or joint-operation condition for the real estate investment or joint-operation;

　　2. Building houses with one side contributing land and the other capital, and distribute the houses according to the proportion for their own use;

　　3. In the enterprise merge, the real estate transferred from one side to the other side.

 (IX) Deduction/exemption of Stamp Tax@@page@@

The stamp tax is exempted with the following vouchers:

　A Transcripts or copies of the stamp tax-paid voucher (excluding the one used as the original);

　B. Vouchers that indicate donations of one’s belongings to the government, schools, or social welfare organizations of fostering the old widows/widowers, the wounded and the handicapped;

　C. Loan contracts of interest-free loan and low-interest loan;

　D. Contracts of the foreign governments or international financial organizations providing preferential loans to China government;

　E. Insurance contracts of the product of agriculture and forestry and animals in stock raising;

　F. Contracts of publishing;

　G. Vouchers among organizations that issue books, newspapers or magazines, or between publishing company and subscribing organizations or individuals.

 (X) Deduction/exemption of Real Estate Tax

　A. Real estates used by government bodies, social groups and armies;

　B. Real estates used by organizations whose operating expenses are disbursed by finance sectors;

　C. Real estates used as religious sites, temples and places of historic interest and scenic beauty;

　D. Non-profit residential real estates (applicable to foreign individuals, fellow citizens of Hong Kong, Macao and Taiwan, overseas Chinese from January 1, 2000);

　E. Real estates in heavy repair and being unused over half a year, with applications from taxpayers and approvals from county / district level taxation authorities;

　F. Damaged or risky real estates which are out of use, with examination and approval from related authority;

　G. Regular deduction/exemption of real estate tax can be applied to enterprises that have little or no profits after taxpayers’ applications being examined by county / district level taxation authorities and approved by the municipal administration of taxation;

　H. Newly built real estates listed as special items of tourism industry in 1994 are exempted from real estate tax during the period of loan repayment, with approvals from the municipal administration of taxation.

 (XI) Deduction/exemption of Automobiles and vessels Usage Tax@@page@@

　A. Automobiles and vessels used by government bodies, social groups and armies;

　B. Automobiles and vessels used by organizations whose operating expenses are disbursed by finance sectors;

　C. Fishing vessel of which load capacity is less than one ton;

　D. Pontoons and vessels for float bridges;

　E. Automobiles and vessels for marine defense, watering carts, prison vans, police cars, epidemic prevention cars, ambulances, harbor work automobiles and vessels, and engineering vessels;

　F. Non-motor vehicles and vessels used by farmers for the agricultural production, with certification from village committees;

　G. Vessels paying tonnage tax according to related regulations;

　H. Other vehicles and vessels with special conditions approved by MOF or the municipal governments;

　I. Owners of vehicles and vessels that have stopped running can apply for tax exemption, with certification from vehicle management organizations and approvals from county / district level taxation authorities.

 (XII). Deduction/exemption of Urban and Township Land Usage Tax

　A. Land used by government bodies, social groups, armies, organizations whose operating expenses are disbursed by finance sectors, religious temples, park, places of historic interest and scenic beauty; public streets, squares and greenbelts; land for the production of agriculture, forestry, stock raising and fishery;

　B. Land for lodging houses of employees of tax-free organizations;

　C. Land used by the civil welfare enterprises;

　D. Land of schools, hospitals, nurseries, kindergartens held by collectives or individuals;

　E. Land reclaimed from mountain, seas and waste land with the approval is exempted from land usage tax for 5 to 10 years starting form the day of its coming into use．@@page@@

 (XIII). Deduction/exemption of Animal Slaughter Tax.

　A. Slaughter of the livestock for the festivals of Id, Corban and Saint Sacrifice of Moslem;

　B. Part of livestock slaughtered for self consumption;

　C. Livestock slaughtered for foreign consulates in Shanghai;

　D. Livestock slaughtered for science research, medical treatment, teaching dissection and experiments;

　E. Slaughtering diseased and wounded livestock that are considered as inedible by veterinary departments.

　F. Animals slaughtered in villages where piloting programs of “fees changed to taxes” are practiced.

 (XIV). Deduction/exemption of Deed tax.

　A. Land and houses used by government bodies, institutions, castes, and military organizations for handling official business, teaching, medical treatment, science researches and military establishment are exempted from Deed tax

“Land and houses used for handling official business” refer to offices (office buildings) and other land and houses used directly for handling official business.

“Land and houses used for teaching” refer to classrooms (teaching buildings) and other land and houses used directly for teaching.

“Land and houses used for medical treatment” refer to clinics and other land and houses used directly for medical treatment.

“Land and houses used for science researches” refer to sites for science experiments and other land and houses used directly for science research.

“Land and houses used for military establishment” refer to constructions on and under the ground for military command and campaign; airports, harbors and docks for military use; military storerooms, barracks, training sites and sites for experiments; military station for communications, navigation and observation; other land and houses used directly for military establishment.

The usage of the land and houses is affirmed through the documents of land use and house property certificate.

　B. Employees in city or town purchasing for the first time state-owned residential houses (as approved by municipalities above the county level) with acreage within the standard limit can enjoy exemption of deed tax. If the acreage exceeds the standard limit indicated by the State, the exceeding acreage should not be exempted from deed tax.@@page@@

　C. Individuals whose land and house usage rights have been expropriated, engrossed or removed by the government at the level above county, and who purchase land and house usage rights with prices not exceeding the compensation and re-settling fees of the original land and houses can enjoy tax exemption of the deed tax. The exceeding part of the prices above the compensation and re-settling fees should still pay deed tax.

The identification of compensation and re-settling of fees shall be in strict accordance with national regulations, any excessive amount shall not be recognized.

　D. Individuals who have to purchase houses again because of the force majeure can be exempted from deed tax according to real situations. Force majeure refer to the situations that can not be predicted, avoided or conquered, such as the nature disaster, war, etc.

　E. Taxpayers who possess land use right of barren mountains, channels, graves and bottomland for the production of agriculture, forestry, farming and fishing are exempted from deed tax.

　F. According to the related laws and international bilateral and multilateral treaties signed by China, some of the foreign embassies in China, consulates, institutes of foreign Nations in China and diplomatic representations, consul officers and other diplomatic agents who possess property right of land or houses are exempted from deed tax once approved by the Ministry of Foreign Affairs .

　G. Individuals who purchase common residential houses and whose tax payment obligations occur after August 1st 1999 can pay half the deed tax.

　H. Organizations or individuals that purchase unoccupied commercial houses and the tax payment obligations occur between August 1,1999 and end of 2002 can be exempted from deed tax.

　I. Residential houses within the regulated standard area that are built by state owned enterprises for the purpose of solving the problem of housing shortage for their employees through ways of fund raising or purchasing common residential houses, and that are sold to employees (and it’s the first time for the employees to purchase) in accordance with related state housing regulations, with approvals of housing departments of county level municipalities, should be exempted from the tax, in conformity with the Provisional Regulations of Deed Tax of the People's Republic of China.

　J. The deed tax is exempted if the tax point in purchasing vacant commercial or office building occurs between January 1, 2001 and the end of 2002.

　K. In the event of a piece of land or a residence being expropriated, engrossed or removed by a county government or above, if the cost of the regained land or residence is more than the compensation received (either in the form of land or property right swap or in other forms) but the difference is less than 1/3 of the compensation, the deed tax is exempted; if the above cost is over 1/3 of the compensation of the privately owned house, the deed tax is levied on the exceeded amount.

 (XV). Deduction/exemption of Agriculture Tax@@page@@

　A. Deduction/exemption of agriculture tax to encourage agricultural production.

In order to encourage people to expand arable fields and to increase agricultural production, taxpayers that reclaim wasteland or expand tillable fields according to the law can enjoy the exemption of tax for one to three years after the year they obtain profits. Immigrants who reclaim wasteland can enjoy tax exemption for three to five years starting from the year they obtain profits. Taxpayers who plant agriculture crops in fragmentary pieces of land near their houses need not pay any agriculture tax. In order to encourage agricultural science researches and improve agriculture technique, income of the institutions of agricultural science researches and agriculture school from agriculture experimenting fields is exempted from agriculture tax.

　B. Deduction/exemption of agriculture tax for disasters and poor harvests

Considering the people’s life in disaster area and supporting them to resume their production, taxpayers suffering from flood, drought, hurricane, hail or other natural disasters can enjoy deduction/exemption of agriculture tax according to the degree of poor harvests. Detailed rules are set by each province, municipality and municipality directly under the Central Government.

C. Deduction/exemption of agriculture tax for social reasons.

Peasants who suffer from special social reasons can enjoy deduction/exemption of agriculture tax. These include:

　　1. family members of martyrs, handicapped soldiers in rural area and other taxpayers who lose capacities for labor and have difficult in paying tax;

　　2. peasants in old, backward revolution basis who have difficult;

　　3. the laggard and difficult minority area;

　　4. poor mountain areas with inconvenient transportation and laggard production.

 (XVI). Deduction/exemption of Agricultural Specialty Tax

Incomes of the agriculture specialties of agriculture science research institutions and agriculture colleges and schools are exempted from tax.

Incomes of agriculture specialties in newly reclaimed mud flat and water areas are exempted from tax for one to three years since the year of obtaining profits.

Poor peasants who receive subsidy from the civil administrative departments can enjoy deduction or exemption of tax.

Poor harvests of agriculture specialties because of natural disaster are deducted or exempted from tax according to the real situation. Taxpayers who lose 30% of incomes because of natural disaster can enjoy tax deduction. Those who lose 60% of incomes can enjoy exemption of agriculture specialty tax.

The above deduction/exemption of tax refers to concessions to specific taxpayer. Any such deduction/ exemption should be applied by taxpayers and examined by taxation authorities at county/district level and approved by superior financial sector. The deduction/exemption of tax of the items enumerated by the State Council should be examined and approved by The State Council or MOF.@@page@@

 (XVII). Deduction/exemption of Land Occupation Tax

　A. Scope of Tax Deduction

　　1. Family members of martyrs, handicapped soldiers and the widows/widowers in countryside who build houses newly within the standard acreage can enjoy deduction or exemption of tax.

　　2. Welfare factories established by civil administrative institutions that employ the handicapped can enjoy deduction or exemption of tax according to the proportion of the handicapped to the whole employees of the factories.

　　3. Peasants who build houses on lands enjoy half deduction of tax.

　　4. People who occupy lands temporarily with the approval for over one year can enjoy half deduction of tax, but should pay the whole tax from the third year if lands are occupied for more than two years.

　B. Scope of Tax Exemption:

　　1. Land for military establishment. Land for military establishment refers to constructions for command and defense, battle position with weapons and equipment, experimental bases for advanced weapons, military airports, harbors, stations for communications, lines, navigation, storehouses, shooting ranges, training sites, barracks, houses for handling official business below (or of) the division, special fixing places, railway and road lines leading to military establishment at or above the level of province, municipality and municipality directly under the Central Government. Land of the army not for military use can not enjoy tax exemption.

　　2. “Railway lines” refer to the railway lines and the land on two sides, stations, places for loading and unloading goods, land for storehouses. Local railway lines can enjoy tax exemption according to the above situations. Other occupation of land should pay land occupation tax.

　　3. Land for the runways, parking apron, necessary empty spaces, terminals, command tower and radar establishment in airports enjoy tax exemption.

　　4. Land for storehouse of detonator. Storehouses specially allocated for detonators and necessary land for safety is exempted from tax.

　　5. Land of schools. Teaching houses, service buildings, playgrounds, libraries, offices, dinning rooms and dorms of full-time universities, colleges, high schools and elementary schools including these established by some sectors or enterprises are exempted from tax. Land of schools for non-agriculture purposes can not enjoy tax exemption. Night schools, CCP schools, Youth League schools, cadre classes, training centers and correspondence schools can not enjoy tax exemption.

　　6. Land of hospitals. Land of hospitals of armies, the sectors, enterprises, commune hospitals, medical treatment stations and clinics is exempted from tax. Hospitals and clinics held by individuals can also enjoy tax exemption. Nursing homes can not enjoy tax exemption. Land of institutions of family planning, sanitation and anti-epidemic stations and health centers for women and children is not in the scope of tax exemption. @@page@@

　　7. Land of old homes and kindergartens is exempted from tax.

　　8. Land of funeral homes and crematoriums is exempted from tax.

　　9. Land of irrigation establishment for agriculture production is exempted from tax.

　　10. Other lands with the approval of the State Council can also enjoy tax exemption.

Land listed in the scope of tax exemption but has changed its usage to be uncovered by the list should pay land occupation tax since the day of change.

　C. Deduction/exemption of tax for foreign-invested enterprises.

Foreign-invested enterprises in general are not liable for land occupation tax. However, land used by these enterprises in the third industry for the purpose of tourism, entertainment and real estate should pay land occupation tax in accordance with relevant regulations.

 II. Tax Policy Consultation for Civil Welfare Enterprises

 (I). Civil welfare enterprises enjoying tax concessions should satisfy all of the following conditions:

　A. Welfare enterprises organized by civil administrative sectors, residential districts, villages and towns (excluding foreign invested enterprises) before January 1st 1994. Those organized after January 1st 1994 can also enjoy related tax concessions with strict examinations from provincial finance sectors and taxation authorities.

　B. Enterprises of which over 35% or 50% of employees are categorized as the “four kind of the handicapped people”.

　C. Enterprises with wholesome administrative system and “four tables and one booklet”.

　D. Enterprises examined and accepted as eligible by civil administrative institutes and taxation authorities and awarded with the Certificate of Social Welfare Enterprise.

 (II). Deduction/exemption of Tax for the Handicapped, old widows/widowers and Family Members of Martyrs

　A. Incomes of the handicapped, old widows/widowers and family members of martyrs by production and management with business license and tax registration can enjoy the following tax concessions after the approval of the taxation administration:

　　1. Income tax collected by way of account auditing: Those whose amount of income tax per year is below 2400 RMB can enjoy income tax exemption. Those whose amount of income tax exceeds 2400 RMB can have a tax deduction of 2400 RMB.

　　2. With other means of tax collection, people whose income tax that month is below 200 RMB can enjoy tax exemption. People whose income tax exceeds 200 RMB can have a tax deduction of 200 RMB that month.@@page@@

　B. The handicapped refer to persons who hold the certificate of the handicapped issued by the Shanghai Association of the Handicapped in accordance with the rule of the State Council. Old widows/widowers and family members of martyrs refer to persons who are recognized by Shanghai civil administrative institutions according to related rules of China.

　C. The handicapped who provide services of processing, fixing and repairing can be exempted from VAT.

　D. Business incomes of the handicapped can be exempted from business operation tax.

　E. Income obtained jointly by the handicapped and non-handicapped persons through above mentioned business can not enjoy exemption of business operation tax or VAT.

 Appendix: Procedure of tax deduction/exemption

·Step one: applications from taxpayers

·Step two: registration at tax collection section in charge

·Step three: examinations by the department of taxation policies in taxation authorities

·Step four: approvals by directors of local taxation authorities

·Step five: the issuance of tax deduction/exemption notice from the Section of Taxation Policies

·Step six: notification to the section of tax collection

·Step seven: notification to taxpayers