Shanghai Jerry Group Inc. - China Business Consultants

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

Article 1 All units and individuals engaged in the productio n, sub-contracting for processing or the importaio -n of consumer goods prescribed by these Regulatio ns (hereinafter referred to as `taxable consumer g oods ') within the territory of the Peopel's Repub lic of China are taxpayers of Consumption Tax (her einafter referred to as `taxpayers') and shall pay Consumption Tax in accordance with these Reglations.

Article 2 The taxable items, tax rates (tax amounts ) of Con -sumption Tax shall be determined in accordance wi th the < Consumption Tax Taxable Items and Tax Rat es (Tax Amounts ) Table > attached to these Regulations.

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

Article 3 For taxpayers dealing in taxable consumer goods wi th differint tax rates, the sales amounts and sale s volumes for the taxable consumer goods shall be accounted for separately. If the sales amounts and sales volumes have not been accounted for separat ely or if the taxable consumer goods with differen t tax rates are combined into a whole set of consu mer 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-produc ed taxable consumer goods for the taxpayer's own u se in the continuous production of taxable consumer goods , no tax shall be assessed; tax shall be a ssessed when the goods are transferred for other use.

For taxable consumer goods sub-contracted for proc essing , the tax shall be collected and paid by th e sub-contractor upon delivery to the contractor. For taxable consumer goods sub-contracted for proc essinh used by the contractor for the continuous p roduction of taxable consumer goods, the tax paid can be credited in accordance with the regulations

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

Article 5 The computation of payable for Consumption Tax sha ll follow either the rate on value or the amount o n volume method. The formulas for computing the ta x payable are as follows:

The tax payable computed under the rate on va lue method = Sales amount * Tax rate.

The tax payable computed under the amount on volume method = Sales volume * Tax amount per u nit.

For taxable consumer goods sold by taxpayers where the sales amounts are computed in foreign currenc ies, the taxable amounts shall be converted into R -enminbi according to the exchange rates prevailin g in the foreign exchange market.

Article 6 The "sales amount" as stipulated in Article 5 of t hese Regulations shall be total consideration and other charges receivable from the buyer for the ta xable consumer goods sold by the taxpayer.

Article 7 Self-produced taxable consumer goods for the taxpa yer's own use that shall be subject to tax in acco rdance with the stipulations of the first paragrap h in Article 4 of these Regulations shall be asses sed according to the selling price of similar cons umer goods produced by the taxpayer, If the sellin g price of similar consumer goods is not available , the tax shall be assessed according to the compo site assessable value. The formula for computing the composite assessable value is as follows:

Composite assessable value =(cost + profit ) / (1 - Consumption Tax rate)

Article 8 Taxable consumer goods sub-contracted for processi ng shall be assessed according to the selling pric e of similar consumer goods of the sub-contractor. If the selling price of similar consumer goods is not available, the tax shall be assessed accordin g to the composite assessable value . The formula for computing the composite assessable value is as follows:

Composite assessable value = (cost + profit ) / (1 - Consumption Tax rate)

Article 9 Imported taxable consumer goods which adopt the rate on value method in computing the tax payable shall be assessed according to the composite assessable value, The formula for computing the composite value is as follows:

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

Article 10 Where the taxable value of the taxable consumer go ods of the taxpayer is obviously low and without p roper justification, the taxable value shall be de termined by the competent tax authorities.

Article 11 For taxpayers exporting taxable consumer goods, th e Consumption Tax shall be exempt , except as othe rwise determined by the State Council. The measure s for exemption of exported taxable taxable consum er goods shall be regulated by the State Administr ation for Taxation.

Article 12 Consumption Tax shall be colledted by the tax auth orities. Consumption Tax on the importation of tax able consumer goods shall be collected by the cust oms office on behalf of the tax authorities.

Consumption Tax on taxable consumer goods brought or mailed into China by individuals shall be levie d together with Customs Duty. The detailed measure s shall be formulater by the Tariff Policy Committ ee of the State Council together with the relevant departments.

Article 13 Taxpayers selling taxable consumer goods and self -producing taxable consumer goods for their own use , except otherwise as determined by the State, shall report and pay tax to the local eompetent ta x authorities governing the taxpayers.

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

For imported taxable consumer goods, the tax shall be reported and paid by the importers or their age nts to the customs offices where the imports 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 assessable periods. of the taxpayers shall be separately determined by th e competent tax authorities according to the magni tude of the tax payable of the taxpayers; tax that cannot be assessed in regular periods can be assessed on a transaction-by-transaction basis.

Taxpayers that adopt one month as an assessable pe riod shall report and pay tax within ten days foll owing the end of the period. If an assessable peri od 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 balan ce of tax due settled within ten days from the fir st day of the following month.

Article 15 Taxpayers importing taxable consumer goods shall p ay tax within seven days after the completion and issuance of the tax payment certificates by the cu -stoms office.

Article 16 The collection and adminisration of Consumption Tax shall be conducted in accordance with the relev ant 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 foreign inv estmint enterprises and foreign enterprises shall be conducted in accordance with the resolutions of the Standing Committee of the National People's Congress.

Article 18 The Ministry of Finance shall be responsible for the interpretation of these Regulations and for the formulation of the Detailed Rules and Regulati on for the Implementation of these Regulations.

Article 19 These Regulations shall come into effect from January 1, 1994. The relevant regulations of the Stat e Council regarding the collection of Consumption Tax prior to the promulgation of these Regulations shall be repealed on the same date.

CONSUMPTION TAXABLE ITEMS AND TAX RATES / AMOUNTS TABLE

I.Tobacco Including Imported

1.Grade A cigarettes cigarettes 45%

2.Grade B cigarettes 40%

3.Cigars 40%

4.Cut tobacco 30%

II.Alcoholic drinks and alcohos

1.White spirits made from cereal 25%

2.White spirits made from potatoes 15%

3.Yellow sporits 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 17% and hair-care products

V.Precious jewelry Including all kinds and precious jade of gold, silver, jewelry and stones and precious stone ornments 10%

VI.Firecrackers and fireworks 15%

VII.Gasoline litre 0.2 yuan

VIII.Diesel oil litre 0.1 yuan

IX.Motor vehicle tyres 10%

X.Motorcycles 10%

XI.Motor cars

1.Those with a cylinder capacity (i. e. emission capacity) of more than 2,200 ml (including 2,200 ml) 8%

Those with a cylinder capacity of between 1,000- 2,200 ml (including 1,000 ml) 5%

Those with a cylinder capacity of less than 1,000 ml 3%

2.Cross-country vehicles (four- wheel drive)

Those with a cylinder capacity of more than 2,400 ml (including 2,400 ml) 5%

Those with a cylinder capacity of less than 2,400 ml 3%

3.Minibuses and vans less than 22 seats

Those with a cylinder capacity of more than2,000 ml (including 2,000 ml) 5%

Those with a cylinder capacity of less than 2,000 ml 3%