Provisional Regulations of the People's Republic of China on Consumption Tax

(State Council: 13 December 1993)

Article 1

All units and individuals engaged in the production, subcontractingfor processing or the importation of consumer goods prescribed by theseRegulations (hereinafter referred to as 'taxable consumer goods') withinthe territory of the People's Republic of China are taxpayers ofConsumption Tax (hereinafter referred to as 'taxpayers') and shall payConsumption Tax in accordance with these Regulations.Article 2

The taxable items, tax rates (tax amounts) of Consumption Tax shallbe determined in accordance with the attached to these Regulations.

Any adjustments to the Consumption Tax taxable items, tax rates (taxamounts) shall be determined by the State Council.Article 3

For taxpayers dealing in taxable consumer goods with different taxrates, the sales amounts and sales volumes for the taxable consumer goodsshall be accounted for separately. If the sales amounts and sales volumeshave not been accounted for separately or if the taxable consumer goodswith different tax rates are combined into a whole set of consumer goodsfor sales, the higher tax rate shall apply.Article 4

Taxable consumer goods produced by the taxpayer shall be subject totax upon sales. For self-produced taxable consumer goods for thetaxpayer's own use in the continuous production of taxable consumer goods,no tax shall be assessed; tax shall be assessed when the goods aretransferred for other use.

For taxable consumer goods sub-contracted for processing, the taxshall be collected and paid by the sub-contractor upon delivery to thecontractor. For taxable consumer goods, sub-contracted for processing usedby the contractor 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 importdeclaration.Article 5

The computation of tax payable for Consumption Tax shall followeither the rate on value or the amount on volume method. The formulas forcomputing the tax payable are as follows:

The tax payable computed under the rate on value method

= Sales amount x Tax rate.

The tax payable computed under the amount on volume method

= Sales volume x Tax amount per unit.

For taxable consumer goods sold by taxpayers where the sales amountsare computed in foreign currencies, the taxable amounts shall be convertedinto Renminbi according to the exchange rates prevailing in the foreignexchange market.Article 6

The "sales amount" as stipulated in Article 5 of these Regulationsshall be the total consideration and other charges receivable from thebuyer for the taxable consumer goods sold by the taxpayer.Article 7

Self-produced taxable consumer goods for the taxpayer's own use thatshall be subject to tax in accordance with the stipulations of the firstparagraph in Article 4 of these Regulations shall be assessed according tothe selling price of similar consumer goods produced by the taxpayer. Ifthe selling price of similar consumer goods is not available, the taxshall be assessed according to the composite assessable value. Theformula for computing the composite assessable value is as follows:

(Cost + profit)

Composite assessable value = --------------------------

(1-Consumption Tax rate)Article 8

Taxable consumer goods sub-contracted for processing shall beassessed according to the selling price of similar consumer goods of thesub-contractor. If the selling price of similar consumer goods is notavailable, the tax shall be assessed according to the composite assessablevalue. The formula for computing the composite assessable value is asfollows:

(Cost of material + Processing fee)

Composite assessable value = -------------------------------------

(1 - Consumption Tax rate)Article 9

Imported taxable consumer goods which adopt the rate on value methodin computing the tax payable shall be assessed according to the compositeassessable value. The formula for computing the composite assessable valueis as follows:

customs dutiable value + Customs Duty

Composite assessable value = --------------------------------------

(1 - Consumption Tax rate)Article 10

Where the taxable value of the taxable consumer goods of the taxpayeris obviously low and without proper justification, the taxable value shallbe determined by the competent tax authorities.Article 11

For taxpayers exporting taxable consumer goods, the Consumption Taxshall be exempt, except as otherwise determined by the State Council. Themeasures for exemption of exported taxable consumer goods shall beregulated by the State Administration for Taxation.Article 12

Consumption Tax shall be collected by the tax authorities.Consumption Tax on the importation of taxable consumer goods shall becollected by the customs office on behalf of the tax authorities.

Taxpayers selling taxable consumer goods and self-producing taxableconsumer goods for their own use, except otherwise as determined by theState, shall report and pay tax to the local competent tax authoritiesgoverning the taxpayers.

For taxable consumer goods sub-contracted for processing, theConsumption Tax due shall be paid to the local competent tax authoritieswhere the sub-contractors are located.

For imported taxable consumer goods, the tax shall be reported andpaid by the importers or their agents to the customs offices where theimports are declared.Article 14

The Consumption Tax assessable period shall be one day, three days,five days, ten days, fifteen days or one month. The actual assessableperiods of the taxpayers shall be separately determined by the competenttax authorities according to the magnitude of the tax payable of thetaxpayers; tax that cannot be assessed in regular periods can be assessedon a transaction-by-transaction basis.

Taxpayers that adopt one month as an assessable period shall reportand pay tax within ten days following the end of the period. If anassessable period of one day, three days, five days, ten days or fifteendays is adopted, the tax shall be prepaid within five days following theend of the period, and a monthly return shall be filed with any balance oftax due settled within ten days from the first day of the following month.Article 15

Taxpayers importing taxable consumer goods shall pay tax within sevendays after the completion and issuance of the tax payment certificates bythe customs office.Article 16

The collection and administration of Consumption Tax shall beconducted in accordance with the relevant regulations of the (Law of thePeople's Republic of China on Tax Collection an Administration) and theseRegulations.Article 17

The collection of Consumption Tax from foreign investment enterprisesand foreign enterprises shall be conducted in accordance with theresolutions of the Standing Committee of the National People's Congress.Article 18

The Ministry of Finance shall be responsible for the interpretationof these Regulations and for the formulation of the Detailed Rules andRegulations for the Implementation of these Regulations.Article 19

These Regulations shall come into effect from January 1, 1994. Therelevant regulations of the State Council regarding the collection ofConsumption Tax prior to the promulgation of these Regulations shall berepealed on the same date.

CONSUMPTION TAXABLE ITEMS AND TAX RATES (TAX AMOUNTS) TABLE

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Taxable Items Scope of charge Tax Unit Tax Rate/Amount

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I. Tobacco

1. Grade A cigarettes Including Imported 45%

cigarettes

2. Grade B cigarettes 40%

3. Cigars 40%

4. Cut tobacco 30%

II. Alcoholic drinks and

alcohol

1. White spirits made from

cereal 25%

2. White spirits made from 15%

potatoes

3. Yellow spirits ton 240 yuan

4. Beer ton 220 yuan

5. Other alcoholic drinks 10%

6. Alcohol 5%

III. Cosmetics Including cosmetics sets 30%

IV. Skin-care and hair-care

products 17%

V. Precious jewelry and Including all kinds of

precious jade and gold, silver, jewelry, and 10%

stones precious stone ornaments

VI. Firecrackers and fire-works 15%

VII. Gasoline litre 0.2 yuan

VIII. Diesel oil litre 0.1 yuan

IX. Motor vehicle tyres 10%

X. Motorcycles

XI. Motor cars 8%

1. Those with a cylinder 8% capacity (i. e. emission capacity) of more than 2200ml (including 2200ml)

Those with a cylinder 5% capacity of between 1000-2200ml (including 1000ml)

Those with a cylinder 3% capacity of less than 1000ml

2. Cross-country vehicles

(four-wheel drive)

Those with a cylinder 5% capacity of more than 2400ml (including 2400ml)

Those with a cylinder 3% capacity of less than 2400ml

3. Minibuses and vans less than 22 seats

Those with a cylinder capacity of more than 5%

2000ml (including 2000ml)

Those with a cylinder 3% capacity of less than 2000ml