Income Tax Law of the People's Republic of China on Chinese-foreign Equity Joint Ventures
Order No.10 of the Chairman of the Standing Committee of the National People's Congress
September 10, 1980
(Adopted at the Third Session of the Fifth National People's Congress on September 10, 1980 and promulgated for implementation by Order No.10 of the Chairman of the Standing Committee of the National People's Congress on September 10, 1980)
Article 1 Income tax shall be paid in accordance with this Law by Chinese-foreign equity joint ventures (hereinafter referred to as "joint ventures") within the territory of the People's Republic of China on their income from production, business operations and other sources.
Income tax on the income derived from production, business operations and other sources by branches and subbranches of a joint venture that are within and outside the territory of China shall be paid by their head office on a consolidated basis.
Article 2 The taxable income of a joint venture shall be the amount remaining from its gross income in a tax year after the costs, expenses and losses have been deducted.
Article 3 The income tax rate on joint ventures shall be 30%. In addition, a local income tax of 10% of the assessed income tax shall be levied.
The income tax rates on joint ventures exploiting petroleum, natural gas and other resources shall be stipulated separately.
Article 4 In the case of a foreign joint venturer remitting out of China its share of profit obtained from the venture, an income tax of 10% shall be levied on the remitted amount.
Article 5 A joint venture scheduled to operate for a period of 10 years or more shall, upon approval the tax authorities of an application filed by the venture, be exempted from income tax in the first two years after it has begun to make a profit and allowed a 50% reduction in the third through the fifth years.
With the approval ol the Ministry of Finance of the People's Republic of China, joint ventures engaged in low-profit operations such as farming and forestry or joint ventures established in remote, economically under-developed areas may be allowed a 15-30% reduction in income tax for a period of another ten years following the expiration of the term for exemption and reductions prescribed in the preceding paragraph.
Article 6 A joint venturer which reinvests in China its share of profit obtained from the venture for a period of not less than five years shall, upon approval by the tax authorities of an application filed by the joint venturer, be refunded 40% of the income tax already paid on the reinvested amount. If it withdraws the reinvested funds before the end of the fifth year, it shall repay the refunded tax.
Article 7 Losses incurred by a joint venture in a tax year max, be made up with a corresponding amount drawn from next year's income. Should the income in the subsequent tax year be insufficient to make up for the said losses, the balance may be made up with further deductions from its income year by year, but within a period not exceeding five years.
Article 8 Income tax on joint ventures shall be computed and levied in an annual basis and paid advance in quarterly instalments. Such advance payments shall be made within 15 days after the end of each quarter, and the final settlement shall be made within five months after the end of each tax year, with a refund for any overpayment or a supplemental payment for any deficiency.
Article 9 Joint ventures shall file their income tax returns in respect of advance payments with the local tax authorities within the period prescribed for advance payments, and shall file their annual income tax returns together with the statements of final accounts within four months after the end of the tax year.
Article 10 Income tax on joint ventures shall be computed in terms of Renminbi (RMB). Income in foreign currency shall be taxed on the equivalent amount converted into Renminbi according to the exchange rate quoted by the State General Administration of Exchange Control of the People's Republic of China.
Article 11 When a joint venture starts operations, changes its line of production, moves to a new site, ceases to operate or assigns its registered capital, it shall present the relevant certificates for tax registration with the local tax authorities within 30 days after registering with the General Administration for Industry and Commerce of the People's Republic of China.
Article 12 The tax authorities shall have the right to inspect the financial, accounting and tax affairs of joint ventures. The joint ventures must make reports according to the facts and provide all relevant information; they may not refuse to cooperate and may not conceal the facts.
Article 13 A joint venture must pay its tax within the prescribed time limit. In case of failure to do so, the tax authorities, in addition to setting a new time limit for tax payment, shall impose a surcharge for overdue payment equal to 0.5% of the overdue tax for every day in arrears, starting from the first day payment becomes overdue.
Article 14 The tax authorities may, in light of the circumstances, impose a fine on a joint venture which has violated the provisions of Articles 9, 11 or 12 of this Law.
In dealing with any joint venture which has evaded or refused to pay tax, the tax authorities, in addition to pursuing the tax payment, impose a fine of not more than five times the amount of the tax underpaid or not paid, in accordance with the seriousness of the case. Cases of gross violation shall be handled by the local people's courts in accordance with the law.
Article 15 In case of a dispute with the tax authorities over tax payment, a joint venture must pay tax according to the relevant regulations before applying to higher tax authorities for reconsideration. If it does not accept the decision made after such reconsideration, it may bring suit in the local people's court.
Article 16 Income tax paid abroad by a joint venture or its branches or subbranches may be credited against the assessed income tax of the head office.
When agreements on avoidance of double taxation have been concluded between the Government of the People's Republic of China and foreign governments, income tax credits shall be handled in accordance with the provisions of the respective agreements.
Article 17 Rules for the implementation of this Law shall be formulated by the Ministry of Finance of the People's Republic of China.
Article 18 This Law shall enter into force on the date of promulgation.