National Tax Authorities and Local Tax Authorities of Provinces, Autonomous Regions, Directly-Administered Municipalities, and Cities Under Separate Planning:

To strengthen and standardize the determination and collection of enterprise income tax, the State Administration of Taxation has formulated the “Measures for the Determination and Collection of Enterprise Income Tax (Trial Implementation).” These measures are now being distributed to you; please comply with them accordingly.

1. The method for collecting corporate income tax must be strictly determined in accordance with the prescribed scope and standards. The scope of corporate income tax collection by means of fixed-amount assessment must not be expanded in violation of regulations. It is strictly prohibited to adopt a “one-size-fits-all” approach to fixed-amount assessment of corporate income tax based on industry or enterprise size.

II. Enterprise income tax shall be assessed and collected in accordance with the principles of fairness, impartiality, and openness. The taxable income amount or the applicable tax rate for each enterprise should be determined on a case-by-case basis, taking into account comprehensively such factors as the taxpayer’s industry characteristics, geographic location, business scale, revenue level, and profit level. This ensures that enterprises of similar size and operating in the same region bear roughly equivalent income tax burdens.

III. Provide excellent service in the administration of enterprise income tax under the assessed collection method. The deployment and arrangement of enterprise income tax assessment collection should take into account the convenience of taxpayers, align with their actual circumstances, and ensure that the appraisal and identification procedures are completed promptly within the prescribed time limits.

4. Promote the establishment of accounting systems and record-keeping practices among taxpayers. Tax authorities should actively urge taxpayers subject to the assessed income tax collection method to establish proper accounting systems and improve their operational management, and guide these taxpayers toward transitioning to the book-based tax collection method. For taxpayers who meet the conditions for book-based tax collection, the collection method should be promptly adjusted and switched to book-based collection.

V. Strengthen inspection efforts targeting taxpayers under the fixed-rate tax collection method. For taxpayers adopting the fixed-rate corporate income tax collection method, intensify inspection efforts by integrating the review and verification of annual tax filings with routine tax administration inspections. Reasonably determine the annual audit coverage rate to prevent taxpayers from intentionally using the fixed-rate collection method to reduce their tax burden.

6. The State Administration of Taxation and local tax authorities shall cooperate closely. They are to jointly carry out the assessment and collection of enterprise income tax, jointly determine industry-specific taxable income rates, and jointly negotiate and set the amount of income tax payable for each taxpayer. Taxpayers under the jurisdiction of both the State Administration of Taxation and local tax authorities—those whose production and business locations, business scales, and business scopes are essentially identical—should have substantially consistent assessed amounts of income tax payable and taxable income rates.



State Administration of Taxation

March 6, 2008

Administrative Measures for the Determination and Collection of Enterprise Income Tax (Trial)

Article 1: In order to strengthen the administration of corporate income tax collection, standardize the work of determining and collecting corporate income tax on a presumptive basis, ensure that state tax revenues are promptly and fully remitted to the treasury, and safeguard the legitimate rights and interests of taxpayers, these Measures are formulated in accordance with the relevant provisions of the Corporate Income Tax Law of the People’s Republic of China and its Implementing Regulations, as well as the Tax Collection and Administration Law of the People’s Republic of China and its Implementing Rules.

Article 2: These Measures apply to resident enterprise taxpayers.

Article 3: Enterprise income tax shall be assessed and collected on taxpayers falling under any of the following circumstances:

(1) Those that, in accordance with the provisions of laws and administrative regulations, may not be required to maintain accounting books;

(2) Those that, according to the provisions of laws and administrative regulations, should have been established but have not set up accounting books;

(3) Illegally destroying accounting books or refusing to provide tax-related materials;

(4) Although accounting books have been established, the accounts are disorganized or cost-related documents, revenue vouchers, and expense vouchers are incomplete and insufficient to facilitate accurate bookkeeping;

(5) Failure to file a tax return within the prescribed time limit when a tax liability arises, and continued failure to file the return even after being ordered by the tax authority to do so within a specified period;

(6) The declared tax base is significantly lower than the actual value and there is no justifiable reason for this.

This measure does not apply to taxpayers in special industries, taxpayers of special types, or taxpayers above a certain scale. The specific taxpayers mentioned above will be defined separately by the State Administration of Taxation.

Article 4: The tax authorities shall, based on the specific circumstances of the taxpayer, determine either the applicable tax rate for taxable income or the amount of income tax payable for taxpayers subject to assessed collection of enterprise income tax.

The taxable income rate shall be determined if any of the following circumstances apply:

(1) Those who can correctly calculate (verify) the total revenue but cannot correctly calculate (verify) the total costs and expenses;

(2) Able to correctly calculate (verify) the total cost and expenses, but unable to correctly calculate (verify) the total revenue;

(3) Those that, through reasonable methods, can calculate and estimate the taxpayer’s total income or total costs and expenses.

If the taxpayer does not fall under any of the above circumstances, their income tax payable shall be determined by assessment.

Article 5: The tax authorities shall determine and collect enterprise income tax using the following methods:

(1) Determine the tax burden level by referencing the tax burden levels of taxpayers in similar industries or comparable industries locally, whose business scales and income levels are roughly equivalent.

(2) Determined by applying a fixed rate based on the amount of taxable income or the amount of cost and expense expenditures;

(3) Determined or calculated based on the consumption of raw materials, fuels, power, and other inputs;

(4) Determined using other reasonable methods.

If using only one of the methods listed in the preceding paragraph is insufficient to accurately determine the taxable income or tax payable, two or more methods may be used simultaneously. In cases where the tax payable calculated using two or more methods differs, the higher of the calculated tax amounts shall prevail.

Article 6: If the enterprise income tax is assessed and collected using the taxable income rate method, the formula for calculating the income tax payable shall be as follows:

Taxable income = Taxable income × Applicable tax rate

Taxable income = Taxable income amount × Taxable income rate

Alternatively: Taxable income = Cost (expense) expenditure amount / (1 - Taxable income rate) × Taxable income rate

Article 7: For taxpayers who adopt the taxable income rate method to determine and collect enterprise income tax, if a taxpayer engages in multiple lines of business, regardless of whether each business line is accounted for separately, the tax authority shall determine the applicable taxable income rate based on the taxpayer’s primary business line.

The primary business project shall be the one that accounts for the largest share—either in terms of total revenue, total cost (expenses), or the quantity of raw materials, fuel, and energy consumed—among all business projects operated by the taxpayer.

Article 8: The tax rate on taxable income shall be determined within the ranges specified in the following table:

　　Article 9: If a taxpayer experiences significant changes in its business scope or primary business activities, or if the taxable income or tax payable increases or decreases by 20% or more, it shall promptly notify the tax authorities and file an amendment to the previously determined tax payable or tax rate.

Article 10: The competent tax authority shall promptly deliver the “Enterprise Income Tax Assessed Collection Verification Form” (sample form attached) to the taxpayer and promptly complete the verification process for assessing enterprise income tax collection. The specific procedures are as follows:

(1) Within 10 working days of receiving the “Enterprise Income Tax Assessed Collection Verification Form,” the taxpayer shall complete the form and submit it to the competent tax authority. The “Enterprise Income Tax Assessed Collection Verification Form” is issued in triplicate: the competent tax authority and the county tax authority each retain one copy, while the third copy is delivered to the taxpayer for implementation. The competent tax authority may also, based on actual work requirements, appropriately increase the number of copies for backup purposes.

(2) The competent tax authority shall, within 20 working days after receiving the “Enterprise Income Tax Assessed Collection Verification Form,” review and verify each enterprise individually by category, submit its verification opinion, and then forward it to the county tax authority for review and confirmation.

(3) The county tax authority shall complete the review and confirmation process within 30 working days after receiving the “Enterprise Income Tax Assessed Collection Verification Form.”

If a taxpayer fails to complete and submit the “Enterprise Income Tax Assessed Collection Verification Form” within the prescribed time limit after receiving it, the tax authority will deem that the taxpayer has already submitted the form and will proceed with the re-examination and verification according to the procedures outlined above.

Article 11: The tax authorities shall re-verify taxpayers who were subject to the presumptive taxation method for enterprise income tax by the end of June each year, covering the previous year’s tax period. Until the re-verification process is completed, taxpayers may tentatively pay their enterprise income tax in advance according to the presumptive taxation method used in the previous year; after the re-verification process is complete, adjustments will be made based on the results of the re-verification.

Article 12: The competent tax authority shall publicly disclose, on a case-by-case and household-by-household basis, the determined amount of income tax payable or the applicable tax rate. The competent tax authority shall determine the location and method of public disclosure in accordance with principles that facilitate taxpayers’ and the general public’s understanding and oversight.

If a taxpayer disagrees with the tax authority’s determination of the corporate income tax collection method, the assessed amount of income tax payable, or the applicable tax rate on taxable income, the taxpayer shall provide legitimate and valid supporting evidence. After verification and confirmation by the tax authority, any disputed matters will be adjusted accordingly.

Article 13: If a taxpayer adopts the method of determining the taxable income rate, it shall file and pay taxes in accordance with the following provisions:

(1) The competent tax authority shall determine, based on the amount of tax payable by the taxpayer, whether the taxpayer shall make monthly or quarterly provisional payments and conduct annual final tax settlement. Once the provisional payment method has been determined, it may not be changed within a single tax year.

(2) Taxpayers shall calculate the actual tax payable for the tax period based on the determined tax rate applicable to taxable income and make advance payments accordingly. If it is difficult to make advance payments based on the actual amount, with the approval of the competent tax authority, taxpayers may make advance payments at 1/12 or 1/4 of the tax payable for the previous year, or by any other method approved by the competent tax authority.

(3) When taxpayers make advance tax payments or conduct annual final tax settlement, they shall, in accordance with the regulations, complete the “People’s Republic of China Corporate Income Tax Monthly (Quarterly) Advance Tax Return Form (Type B)” and submit it to the competent tax authority within the prescribed tax filing deadline.

Article 14: If a taxpayer adopts the method of determining the amount of income tax payable, it shall file and pay taxes in accordance with the following provisions:

(1) Before the amount of income tax payable is determined, taxpayers may tentatively pay in advance at one-twelfth or one-fourth of the income tax payable for the previous year, or adopt other methods approved by the competent tax authority and make installment payments on a monthly or quarterly basis.

(2) After the amount of income tax payable has been determined, subtract the income tax already paid in advance during the year. The remaining balance shall be evenly divided among the remaining months or quarters to determine the tax liability for each subsequent month or quarter. Taxpayers shall complete the “People’s Republic of China Enterprise Income Tax Monthly (Quarterly) Provisional Tax Return (Form B)” on a monthly or quarterly basis and file their tax returns within the prescribed filing deadlines.

(3) After the end of the tax year, taxpayers shall file their tax returns with the tax authorities within the prescribed time limit, based on their actual business turnover or actual tax payable. If the declared amount exceeds the approved business turnover or tax payable, the tax shall be paid according to the declared amount; if the declared amount is lower than the approved business turnover or tax payable, the tax shall be paid according to the approved business turnover or tax payable.

Article 15: Any act in violation of the provisions of these Measures shall be handled in accordance with the relevant provisions of the "Tax Collection and Administration Law of the People's Republic of China" and its Implementing Rules.

Article 16: The State Taxation Bureaus and Local Taxation Bureaus of each province, autonomous region, municipality directly under the central government, and city separately listed in the national plan shall jointly formulate specific implementation measures in accordance with the provisions of these Measures and submit them to the State Administration of Taxation for record.

Article 17: These Measures shall take effect as of January 1, 2008. The “Notice of the State Administration of Taxation on Issuing the Provisional Measures for the Determined Collection of Enterprise Income Tax” (Guo Shui Fa [2000] No. 38) shall be repealed concurrently.

Attachment:

Enterprise Income Tax Assessed Collection and Verification Form

Taxpayer Code: Assessment Period: Year Amount Unit: Yuan