What types of taxes that foreign-invested enterprises involves?
Tax types refer to different tax types divided in accordance with the different objects of taxation and different places of taxation. The significance of tax types is that : people can distinguish and understand the similarities and differences of objects of taxation as a whole by division of tax types,namely the tax objects of the same tax type shall have the same nature and characteristics. But the nature and characteristics of different tax types are different.Due to the function of tax types, formulation of tax system by every country isn’t stipulated in accordance with the classification of tax types. Thus, the relevant tax types shall be researched when learning about tax laws and systems relevant to foreign-invested enterprises. In accordance with relevant stipulations in our tax laws,the tax types of the foreign-invested enterprise in its location are mainly the following types: local income tax, added-value tax, consumption tax, business tax, customs tax, license plate utilization tax, housing property tax, increment tax on land value, resource tax, contract tax, stamp tax, livestock slaughter tax and others of foreign-invested enterprises and foreign enterprises. The most important ones are income tax, added-value tax, consumption,increment tax on land value, business tax and customs tax of foreign-invested enterprises ,among these taxes
Income Tax of Foreign-invested Enterprises
Income tax of foreign-invested enterprises is a kind of tax levied on incomes gained from production, operation and others that of the foreign-invested enterprises in the territory of China
1.The Characteristics of Income Tax Laws for Foreign-invested Enterprises
Income tax of foreign-invested enterprises is a tax type which has been adopted in Income Tax Law of People ‘s Republic of China for Enterprises with Foreign Investment and Foreign Enterprises at 4th executive meeting of 7th NPC in April. 9th 1991. Before that, the tax of enterprises with foreign investment were mainly adjusted by Sino-foreign Joint Venture Enterprise Income Tax Law of People ‘s Republic of China and Foreign Enterprise Income Tax Law of People ‘s Republic of China. Though there two laws play an important role on encouraging foreign investment and promoting reform and open of China, there exist two questions on adjusting the income tax of foreign enterprises in these two laws:
(1) The tax rate of joint venture cooperative enterprises and enterprises with foreign investment. In accordance with stipulations in the original Sino-foreign Joint Venture Enterprise Income Tax Law of People ‘s Republic of China, the 30 percents tax rate were applicable for the cooperative enterprises , and the cooperative enterprises should pay 10 percents of income tax as local tax, the total tax rate was up to 33 percents. The tax of sino-foreign cooperative enterprises shall adopt fifth level progressive rates, the rate of lowest level is 20 percents, the rate of highest level is 40 percents and pay local income tax 10 percents, the highest debt ratio is 50 percents. Income Tax Law for Foreign Enterprises adopted progressive rates,but considering the tax rates in other countries at that time was a little higher, the last level rate is set a little higher. Since 1990s, many countries had reduced tax rates, such as, the tax rate in the UK had been reduced from 50 percents to 35 percents, the tax rate in the US had been reduced from 46 percents to 34 percents. Under that such conditions, there were two questions existing in tax rates stipulated by the local authorities of the original tax laws: one is large tax rate differential between cooperative enterprises ,enterprises with foreign investment and equity joint venture; the other one is that tax rate is a little higher and not good for attracting foreign investment, comparing with eastern developing countries.
2. Foreign-invested Enterprise Income Taxpayer
Foreign-invested enterprise income taxpayer refers to the entities and individuals that gain the incomes from production and operation in foreign-invested enterprises within the territory of China, including the followings: Chinese-foreign entity joint venture, including head offices and branch offices of Chinese-foreign entity joint venture within the territory of China and oversea branch offices; Chinese-foreign cooperative joint venture; foreign-invested enterprises. If the head office is based in China, the income tax of production and operation of the oversea offices shall be covered by the head office.
When Chinese-foreign entity joint venture cooperate with domestic enterprises to establish a new entity joint venture, if the foreign shares cover more than 25 percents of the registered capital, the new enterprise shall pay income tax in accordance with Income Tax Law of People’s Republic of China for Enterprises with Foreign Investment and Foreign Enterprises after being approved by tax authority. If the shares that the foreign party holds are up to 25 percents , the enterprises shall pay for enterprise income tax as domestic and associated enterprises. There is a issue on the subject qualification of joint stock enterprises with foreign investment that shall be paid attention to, that is whether the joint stock enterprises with foreign investment can be the taxpayers for the income tax of foreign-invested enterprises. About this, it shall be treated according to different and specific situations as follows：first is that enterprises transformed into joint stock enterprises with foreign investment under the approval from relevant authorities shall pay the income tax as foreign-invested enterprises; second is that the newly-established joint stock companies that set up jointly by domestic enterprises and foreign-invested enterprises after approval, and among the shares purchased by the promoters, if the shares of foreign enterprises are up to or exceeding 25 percents, the new companies shall pay enterprise income tax as enterprises with foreign investment after being approved by tax authority. Otherwise, the companies shall pay enterprise income tax as domestic enterprises. The enterprises with foreign investment that are transformed into joint stock companies and issue shares outward shall pay enterprise income tax as domestic enterprises. The third is that oversea joint venture set up jointly by domestic and foreign parties and with branch companies or branch offices set up within the territory of China shall pay income tax as foreign enterprises; the fourth is that Chinese-foreign cooperative enterprises are without the qualification as legal person and set up jointly bu domestic and foreign enterprises, the Chinese party shall pay income tax regarding the enterprise as domestic enterprises, and foreign party shall pay income tax regarding the enterprises as foreign-invested enterprises, due to the cooperative enterprises without the status of independent legal person. If the Chinese-foreign enterprise that is without the qualification as legal person has its own articles of association, which is under co-management and united accounting of domestic and foreign enterprises that share benefits and losses, shall apply and be approved by local authority to pay income tax in accordance with Income Tax Law of People’s Republic of China for Enterprises with Foreign Investment and Foreign Enterprises.
3. Levy Scope for Income Tax of Enterprise with Foreign Investment
The tax object for income tax of enterprises with foreign investment is also called object of taxation, refers to the income from production and business operation of foreign-invested enterprises and other income. The income from production and business operation include the income from production and business operation of manufacturing industry, extractive industry, transportation industry, construction and installation, agriculture, forestry, livestock husbandry, fishery industry, water conservancy industry, business, finance industry, service industry, exploration industry and other industry and other income from production and business operation. The other income from production and business operation refers to profits, interests, rental, earnings from property transferring, earnings from offering of transferring patent rights, exclusive technology rights, trademark rights, copyrights and non-operating incomes.
Tax levy scope for income of enterprises with foreign investment includes the all income of foreign-invested enterprise earned in China and all income of foreign-invested enterprises with head offices setting up in China earned in China. To be specific,the incomes earned in China include the following parts: first, the incomes from production and business operation of institutions ans work places established in China; second, the profits(stock divided) ,interests, rental, royalties and other incomes that generated within or without the territory of China that have actual connections with the institutions and work places set up in China by foreign-invested enterprises. The incomes from outside the territory of China include the incomes earned from outside the territory of China by foreign-invested enterprises and the incomes from production and business operation and other incomes of the branch offices of the foreign-invested enterprises set up outside the territory of China .
4. The calculation of income tax of foreign-invested enterprises involves two basic issues, namely is the calculation of the account of taxable income and the calculation of income tax. Firstly, we shall deal with the issue on the account of taxable income. The so-called the account of taxable income of the foreign-invested enterprises refers to the amounting remaining of the institutions engaging in production and operation and set up in the territory of China by foreign-invested enterprise from its gross income after the costs,fees and losses have been deducted. The calculation formula is as follows:
(1) The amount of taxable income= the product profits + the profits from other business - product sales tax- non-business expenditure
(2) Product sales profits= the net product sales - product selling costs- the product selling tax- (sales expenses+ management costs + financial fees)
(3) The net product sales= the total sales of product-(sales returns+sales allowances)
(4) Product sales expenses= current product expenses+ total of all costs in beginning inventories-total of all costs in ending inventories
(5) Current product costs= current production costs+costs on beginning inventories of semi-finished products and work-in-process costs - costs on ending inventories and work-in-process costs
(6) Current production expenses=direct materials that the current production use+ direct wages+ manufacturing costs
(1) Taxable income=selling profits+ profits gained from other business- non-business income- non-business expenditures
(2) Selling profits= the net sales- sales expenses- sales tax - (selling expenses+ management costs + financial fees)
(3) The net sales=the total sales of product-(sales returns+sales allowances)
(4) The net sales= the costs on the beginning products inventories+[the costs on current purchases - (purchase returns+ purchase discounts and allowances)+ purchase expenses] - the costs on ending product inventories
(1) The taxable income=total revenue from business + non-business income- non-business expenditures
(2) The net revenue from business=total revenue from business - (the business income tax +business expenditures + management costs+ financial costs)
Other Industry: please refer to the above formula for calculation
when calculating the taxable income of foreign-invested enterprises, there are several issues that shall be paid attention to:
(1) About the calculation principles of enterprises’ taxable income. To insure the taxable income is generally based on the principle of accrual basis. According to this principle, the following three incomes from operating activities can be insured into different stages, which shall be the basis of calculation of taxable incomes:
1) The enterprises that sell products or commodities in installment plan shall ensure the achievement on selling revenue according to the date of delivering invoice for the products or commodities, and also ensure the achievement on selling revenue in accordance with the due dates stipulated in the contracts;
2) The enterprises that have engaged in construction, installment, assembly, projects and offered labour service for a duration of more than one year shall ensure the incomes in accordance with project process or the completed workload;
3) The enterprises that have machined , manufactured large-scale machinery equipment , boats and ships and others for other enterprises for a duration of more than one year shall ensure the incomes in accordance with project process or the completed workload;
If the income of foreign-invested enterprises is non-monetary assets or rights and interests, the income account shall be ensured in accordance with the principle of accrual basis by the following ways:
1) when Chinese-foreign cooperative enterprises adopt the method of production sharing, the products that are gained by partners are the gained income, the account of incomes shall calculated in accordance with the selling price to a third party or taking the current market price ad a reference;
2) When foreign enterprises engage in cooperating with others to explore and develop oil resources, the crude oil that the partners gained is the gained income, the account of incomes shall calculated subject to the price that is regularly adjusted according to the price of crude oil with the same quality in international market;
3) when the gained incomes of enterprises are non-monetary assets or rights and interests, the gained incomes shall be calculated in accordance with current market price. What shall be emphasized is that if the foreign-invested enterprises can not offer the complete, accurate expense and fees receipts, the profit rates shall be assessed and determined by the local tax authority in accordance with the profit level of the same industry or similar industry to calculate the taxable incomes. If the foreign-invested enterprises can not declare the amount of incomes correctly, the taxable incomes shall be ensured by the method of expense plus reasonable profits adopted by the local tax authority.
(2) About the expenses and fees. For calculating accurately the taxable income, Rules for Implement of Tax Laws of Peoples’ Republic of China for Enterprises with Foreign Investment and Foreign Enterprises specifically stipulates the usage scope of expenses and fees including the fees and expenditure that are allowed to enter into the expenses, the fees and expenditure that are not allowed to enter into the expenses and the fees and expenditure that are allowed to enter into the expenses only for one time, for the fees and expenditures occurred in the process of production and operation of the foreign-invested enterprises. In accordance with article 19 in Rules for Implement of Tax Laws of Peoples’ Republic of China for Enterprises with Foreign Investment and Foreign Enterprises, the following fees shall be not allowed to enter into the expenses:
1) Income allocation, F.E stock dividend
2) Fines and losses caused by lawbreaking;
3) The losses caused by natural disasters and accidents that can gain insurance compensation;
4) Entertainment expenses that exceed the standard of entertainment expenses and have no connection with business;
5) Fees used in donation that has no public welfare nature or remedy nature;
6) Royalties paid to general head offices.
Some fees can be listed into the expenditures and costs by stage, but can not be allowed to be listed into expenditures and costs for one time, these fees includes:
1) expenditures of tangible assets, such as fees for purchasing equipment for offices, costs on constructing houses and other building facilities, and so on;
2) Expenditure of intangible assets, such as expenditures on purchasing intangible assets such as proprietary technologies, patent rights, trademark rights, copyrights and other concessions. The intangible assets that the investors regard as investment or the intangible assets that the enterprises have been transferred shall be amortized in accordance with tenure use stipulated in disclosure agreement; if there is no tenure use stipulated in disclosure agreement,or there is self-developed tangible assets, the tenure shall be no less than 10 years.
3) The fees occurred during opening period of the enterprise, the enterprise shall amortize the fees in the next month after the beginning of production and operation, but the amortized amount of each term shall be no more than 20 percents of total fees.
(3) About tax issues on assets. The tax issues on assets shall be divided into the tax issues on fixed assets and tax issues on current assets. The fixed assets refers to houses, buildings, machines, machinery, transportation tools and devices, instruments, tools and other related to production and operation with tenure more than one year. The articles that do not belong to the main equipment for production and operation and are with unit price under 2,000 Yuan or tenure no more than two years shall be listed as fees in accordance with practical used amounts. The value of the fixed assets shall be subject to the original price, the specific implement includes:
1) The purchased fixed assets shall take the total amount of the purchasing price plus freight charges, installment fees and relevant fees before usage as the original price;
2) The self-made and self-built fixed assets, shall take the fees occurred in the process of manufacturing and construction as the original price
3) The expenses for technological renovation and innovation of fixed assets shall increase the original price of fixed assets and shall not be included in the expenses;
4) The fixed assets as investment shall take the total amount of the reasonable prices stipulated in contracts or the prices evaluated subject to the market price plus the fees before usage as original prices, in accordance with the condition of assets. The depreciation of fixed assets of foreign-invested enterprises shall be calculated in the following month after the month that the fixed assets come into use and the depreciation of fixed assets shall stop to be used in the following month after the month that the enterprise stops to operation. These enterprises that engage in exploring and developing oil resources shall take oil and gas field as the unit of investment at the developing phase and all cumulative amount as expenditure of capital, the depreciation shall be calculated on the following month after the month that commercial production is beginning in the oil and gas field. The depreciation of fixed assets shall adopt the method of lines to calculate. The residual value of fixed assets shall be estimated before calculating the depreciation and be subtracted from the original price of fixed assets, the residual value shall be no less than 10 percents of the original. If there is few or no residual value, it shall be reported to the local tax authority for approval. To ensure tho calculate accurately, the tax laws stipulate the following periods of depreciation for different kinds of fixed assets:
1) The period of depreciation of houses and buildings shall be 20 years;
2)The period of depreciation of trains, steamship, machines, machinery and other production equipment shall be 10 years;
3) The period of depreciation of transportation tool except electronic equipment and trains, steamship ans appliance, tools, furniture and others related to production and operation shall be 5 years;
4) These enterprises that engages in exploring and developing oil resources, the fixed assets formed by investment at the stage of development and the later stages shall calculate the depreciation comprehensively, and have no residual value, the period of depreciation shall no less than 6 years;
5) If there are foreign-invested enterprises that have special conditions and need to shorten the period of depreciation, they shall implement accelerated depreciation. If there are foreign-invested enterprises that have been depreciated but still in use, they shall not be depreciated again. Comparing to fixed capitals, the commodities, original materials,work-in-process products, semi-finished products, finished products and by-products of the enterprises shall belong to the current assets of the enterprises, and is pricing in accordance with the cost when inventory, and choose one method among first-in first-out method, moving average method, weighted average method. Once the pricing method has been determined and chosen, it shall not be modified. If it is necessary to change the pricing method, the changing shall be reported to the local tax authority for approval in the next taxing year.
(4) To ensure the taxable incomes of profession,projects and under special conditions. The general laws stipulates on the taxable incomes of relevant foreign-invested enterprises introduced by the mentioned-above location.
1) If the foreign investment enterprises invest other enterprises by physical materials of intangible assets and other non-monetary assets, the invested assets in which the difference between the value stipulated in contracts and the net value of original book, shall be regarded as the profits of property transferring, and be included in the current taxable incomes of the enterprises;
2) For enterprises with foreign investment concurrently engaged in the business of investment, the profits from investment and operation and relevant costs,fees and losses shall be calculated. For the profits gained by the funded enterprises shall not be accounted into the taxable incomes of enterprises, but the research fees, interest expenditures of investment loans, management fees of investment and the investment losses that can not be taken back after expiration related to the investment can not minus the cost to calculate the taxable incomes of enterprises
3) The net profits gained from transferring stock ownership shall be accounted into the current taxable incomes of enterprises;
4) For the enterprises gaining incomes from liquidation when dissolving and liquidating, shall income tax and take the incomes from liquidation as the taxable incomes;
5) For foreign-invested enterprises that have established institutions and workplaces engaged in production and operation within the territory of China that has occurred the annual losses, shall make up the annual losses by the incomes gained in the next tax year. If the incomes gained in the next year are not enough to make up the annual losses, the annual losses shall be made up continuously year by year, but within 5 years.
5. The Calculation of The Income Tax of Foreign-invested Enterprises
The calculation of income tax of foreign-invested enterprises mainly refers to the calculation of general income tax. The general income tax of enterprises shall adopt the methods such as computing on the annual basis, paid in advance in quarterly installment, settlement, payment and at the end of the year, refund for an over-payment or a supplemental payment for any deficiency. When prepaying income tax and local tax quarterly, it shall be calculated in accordance with the profits of the whole-year plan and actual profits gained in first half year. At the end of the year, it shall calculate the whole-year income tax in accordance with actual profits of the current year and make final settlement.
(1) Calculation of Prepaying Income Tax Quarterly
The income tax prepaying quarterly= the profits of the current－year plan×1/4×30%
The local tax prepaying quarterly=the profits of the current－year plan×1/4×30%
(2) Calculation of Year-end Final Settlement Income Tax
Actual taxable income tax of the whole year= actual taxable incomes of the whole year ×30%－the limitation of tax credits
Supplemental income tax=actual taxable income tax of the whole year- prepaid income tax accumulated in each quarter of the whole year
Refundable income tax=actual taxable income tax of the whole year－actual and payable income tax of the whole year
(3) Calculation of Tax Reimbursement of Reinvestment
To encourage the foreign merchants to invest in China actively, the tax laws of China stipulates,the foreign investors of foreign-invested enterprises shall use the gained profits to the reinvest in the territory of China, and with at least 5-year investment period, the 40 percents of tax that has been paid of the refunded parts shall be drawback.
Added-value Tax of Foreign-invested Enterprises
Before 1994, foreign-invested enterprises paid industrial and commercial consolidated tax according to the laws. In accordance with the solution passed at the 5th meeting under the 8th NPC Standing Committee held in Dec. 29th 1993, the foreign-invested enterprises shall pay the industrial and commercial consolidated tax no more, shall pay the unified added-value tax,since Jan.1st 1994. Since then ,the added- value tax became an important tax type for foreign-invested enterprises.
1. The characteristics of Added-value Tax
The reason that our tax laws stipulate that foreign-invested enterprises shall pay the added-value tax is that the added-value tax is a direct tax regarding the added value of goods for sales, labour and the export and import goods offered by producers or managers as the levying objects, and has obvious advantages. It can be said that the added-value tax not only has the advantages of traditional indirect tax, but also overcome the disadvantages of traditional indirect tax, and has a quite good effects on economy and finance, manifested in the following:
(1)The tax scope is wide, the resource of tax is sufficient. The levying objects of the added-value tax cover all kinds of industries. Thus, the added-value tax exists in every field and links.
(2)To achieve tax upon the general public and multi-link tax. The tax upon the general tax refers to the tax levied on the incomes from operation that is accounted into the scope of added-value tax and with added=value factors. The multi-link tax refers to the added-value taxes levied on the production, wholesale, retail links of taxable products. Thus, the levying scope of added-value tax is wide and can ensure the country can gain sufficient fiscal revenue, and ensure the tax can be put into storage in time. On the other hand, the added-value tax is not levied on the whole amount of sales incomes, it is just levied on the untaxed parts of the sales amount, therefore, avoid the disadvantage of tax repeation.
(3)The tax burden is not influenced by the circulating links and ;;;;;;;;;;. No matter how many links in the process of operation, the added-value tax of the products shall remain still, as long as the final sales price of the products are unchanged. In this way, enterprises will not change the original methods of production and operation due to added-value tax. At the same time, the tax rate with the same percentages is adopted by the added-value tax levied on the majority of commodities and labour, and the equal burden is implemented, therefore the intervention capacity and inducing capability of added-value tax shall be largely cut down,but provide advantages for the basic leading capacity of marketing mechanism on resources. Besides, the general value adding and multi-link tax levying process make the tax burden more fair and reasonable, and estimate the unfair tax-burden phenomena existing in the circulation tax occurred between the producers and operators, between full-functioning enterprises and specialized enterprises, and is good for division of labour on the basis of specialization on production and operation and promoting optimal configuration on production factors.
(4)The added-value tax rate shall be consistent with the actual and whole tax burden, which is good for taxing on the export and import, and promoting trades.
(5)The added-value tax is a typical indirect tax, the tax burden id with the ability of shift. The taxpayers of latter stage of added-value tax is always the bearers for the taxpayers of the former stage of added-value tax from the process. When the tax burden is passing into the final selling stage with the circulation of commodities, the customers become the final bearers of the added-value tax. So the added-value tax has the ability of shift, which is obvious.
2. The Taxpayers for Added-value Tax
In accordance with Decision on Provisional Regulations Concerning Taxation Including Added-value Tax and Business Tax Applicable to Enterprises with Foreign Investment and Foreign Enterprises passed in the 5th meeting under NPC in Dec. 29th 1993, since Jan, 1st 1994, for foreign-invested enterprise s engaged in good selling and import and offering labour, shall pay industrial and commercial consolidated tax on more, but pay the unified added-value tax. Due to the differences on the accounting audit level of the taxpayers for added-value tax and the operation scale, the taxpayers foe added-value tax shall be divided into general taxpayers and small-scale taxpayers. This kind of classification is beneficial to strengthen the management of added-value tax and simplify the measures of calculating. The small-scale taxpayers refer to the taxpayers whose annual sales amount is under the standard amount and accounting audit system is inadequate and who can not report and deliver the relevant tax materials. In accordance with the stipulations in Detailed Rules for Implement of The Provisional Regulations of The People’s Republic of China on Added-value Tax, there are two kinds of the identification standards for the taxpayers related to enterprises: one is these taxpayers engaging in producing goods and offering labour and the other one is the general taxpayers engaging in producing goods and offering labour and at the same time concurrently engaging in wholesale and retail of goods, which don’t belong to small-scale taxpayers
3. The Levy Scope of Added-value Tax
Subject to article 1 in The Provisional Regulations of The People’s Republic of China on Added-value Tax, the added value tax levy scope refers to the goods sold in the territory of China, offering the service of machining. Repairing and labour and exported and imported goods.
(1) The goods sold and imported in the territory if China
The goods refer to tangible assets including electricity, heating power and gas that are offered to sell. This concept exclude the real estates and intangible assets from the levy scope of added-value tax. The added-value tax shall not be levied on the agricultural primary products fir time being. The imported goods refer to the goods imported through customs. Selling goods must be the behaviors with paid transfer of goods ownership from the level of legal meaning. But in the practical operation, there are some transaction behaviors always occurring that do not belong typical behaviors of transferring ownership. To balance the tax burden ans strengthen the management of tax resources, the tax laws regard the following behaviors as the behavior of selling goods:
1) Commission others to sell goods;
2) The taxpayers that have set 2 or more institutions and implement unified accounting audit are transferring the goods from one institution to another one for selling, but the institutions set up in the same county(city) shall not included in this item;
3) Use goods of self-made or processed under commission in non-added-value-taxable items, such as collective welfare, individual consumption,or sold to others;
4) Use goods of self-made or processed under commission or purchased as investment which is offered to other entities or individual operators, or allocated to the shareholders or investors, or donated to others;
5) The behaviors of buying goods on the behalf of others. But if the behaviors of buying goods on the behalf of others are equipped with the following conditions, firstly, added-value tax shall not be levied: firstly, the entrusted party doesn’t pay the upfront capital; secondly,the selling party issues an invoice which shall be transferred by the entrusted party to the entrusting party, to the entrusting party ; thirdly, the entrusting party shall settle up with the goods,and collect fees on the formalities also in accordance with sales amount and added amount that is gained practically in the way of selling goods.
Among these,, the first and fifth items regard the goods commissioned on selling and buying as self-sales goods; the second item stipulates that allocating goods between the general office and branch office shall dealt with as sales; the third and fourth items stipulate the tax issues except that the goods that is self made and for self use and purchased goods is used in the production of add-value tax products.
(2） Offer labour service taxable in the territory of China
Labour service taxable refers to these services of machining, repair and replacement. The machining service refers to processing, namely the entrusted party offers raw materials, the entrusted party shall produce t products and charge machining fees. The repair and replacement refer to repair the goods that is unable to operate and lose functions to return to its original conditions and recover its function. For these who offer paid labour service in the territory of China, no matter the processing charges or economic profits in other forms shall be levied added-value tax. What need be paid attention to is the machining, repair and replacement that are offered to the entities or the employers by the employees who are recruited by the entities and individual operators is not included in the added-value tax levy scope.
(3) Mixed sales
Mixed sales refers to selling behaviors of taxpayers and involves the behaviors of selling goods ans non-taxable labour. The non-taxable labour refers to the labour that is not levied the added-value tax, such as service offered in the transportation, architecture, financial insurance. The mixed sales behaviors of these enterprises, enterprise entities and individual operators engaged in production, wholesale, retail of goods shall be regard as selling goods, and pay the added-value tax. The mixed sales behaviors of other entities ans individuals shall be regarded as non-taxable labour and not pay the added-value tax. Taxation collection agencies under The SAT shall ensure whether the behaviors of taxpayers belong to mixed sale behaviors or not.
(4) To ensure sales volume
As a concept of tax laws,sales volume is the base for added-value and has its specific meaning, that is to say the whole payment paid by the purchasing party to the taxpayers who sell goods ans offer labour to the purchasing party, including additional fees and charges, but not including the added-value tax amount that has been paid. The additional fees and charges refers to fees such as commission charge, subsidy, funds, awards, recovery of profits, financial cost, restoring fees, interest on deferred payment, money collected, advance money for another and so on. But not including the following items:
1) Output tax charging from the purchasers;
2) The consumption tax collected and remitted by the articles of consumption processed on consignment that shall be levied the added-value tax;
3) Freight that taxpayers paid for transferring the invoice that is issued by carriers to the purchasing party to the purchasing party.
If the price of the goods for sales and taxable labour is obviously low without any justification, the tax authority shall assess and determine the sales amount in the following orders: first, if price in the same period and the same kind, is shall be calculated in accordance with the price of the goods in same period ans same kind of taxpayers; second, price not in the same period and same kind, is shall be ensure in accordance with the price of the compound tax. The calculation formula is: the price taxable=cost×(1+profit ratio of cost). For the goods levied sales tax in accordance with the quota,the sales amount of added-value tax shall be calculated in the following formula: the sales amount of added-value tax= taxable price+the amount of consumption tax.
Besides, the following issues shall also be paid attention. First, for taxpayers who rent and lend the packing materials and charge deposits which is independently bookkeeping for selling goods, shall not pay the added-value tax for the sales amount. If fail to get back the packing materials due to delay and the deposits not returned, shall pay the added-value tax foe the sales amount. Second,taxpayers sell goods in discount, if there are sales amount and discount amount specified respectively, the discount amount shall not deducted from the sales amount. Third, taxpayers sell goods by the way of trade in, the sales amount shall be calculated in accordance with the selling price of the new goods in the same period.
4 Calculation on added-value tax
The calculation of added-value tax adopt tax deduction method, that is the output VAT amount minus the input VAT amount to calculate the amount of added-value tax, the calculation formula is as follows:
The tax amount payable= current output VAT amount- current input VAT amount
If there are phenomena that the current output VAT is less than the current input VAT happening due to many kinds of reasons, if the input VAT is not sufficient to offset against the output VAT, the excess input tax can be carried forward for set-off in the following periods, for the taxpayers export or import goods, the tax amount shall be calculated in accordance with the taxable price and stipulated ratio, not be allowed to be used to offset the input tax. The calculation formula is:
Taxable price= CIF price+ customs tax + consumption tax
Taxable amount= the price under calculation×tax rat
(1) Amount of output VAT
(2) Amount of output VAT refers to the amount of added-value tax calculated in accordance with the sales amount and applicable tax rate when the taxpayers sell goods and offer labour service. The calculation formula is:
The amount of output VAT= sales amount×tax rate
Due to different specific conditions of producers and operators and various sales forms, the sales amount includes different contents and different calculation methods,the solutions towards these questions have been specifically introduced above. No matter adopting what kind of ways to sell goods and offer labour service, the general taxpayers shall issue added-value tax invoice in which the sales amount and the output VAT amount shall be specified to the purchasers, but the original invoice shall be only need issuing under the following conditions: first, sell goods or offer labour service to the consumers；second，sell tax-free projects; third, the small-scale taxpayers sell goods or offer taxable labour service.
(2) Amount of input VAT
Amount of input VAT refers to the added-value tax amount purchasing goods or accepting taxable labour service that has been paid due to purchasing goods or accepting taxable labour service. It is very significant for ensure the actual tax amount of taxpayers to regard the input VAT as the offset part of paying added-value tax. As the conditions that taxpayers purchase or accept taxable labour service are complex, our tax laws have made specific limitation on the deduction scale of input VAT amount. In accordance with the stipulation in tax laws, the input tax amount deducted from the output tax shall be limited within the added-value tax amount and input tax amount for purchasing tax-free agricultural products noted in Value-added Tax Specific Invoice in the following list:
1) Taxpayers purchase goods or accept taxable labour service, and note the value-added tax amount on Value-added Tax Specific Invoice received from the sellers ;
2) Taxpayers export or import goods, and note the value-added tax amount on tax payment receipt received from customs;
3) Input tax amount is authorized to be calculated in accordance with the deduction rate of 10 percents of purchasing prices on the tax-free agricultural products purchased or agricultural products purchased by small-scale taxpayers.
4) The transportation fees paid in the locations of purchasing goods and selling goods by general taxpayers, shall calculate the input tax amount in deduction rate 7 percents in accordance with freight charges listed in freight receipt,before August 1st, 1998, the deduction rate is 10 percents；
5) For encouraging reasonable exploitation and utilization, the general taxpayers engaging in old and waste materials business can only purchase the old materials, or also the input tax amount shall be calculated in accordance with deduction rate of 10 percents of purchasing prices.
6) The input tax amount of goods purchased in the areas with non-taxable labour service involved in the mixed selling behaviors, if the amount of added-value tax is noted in the VAT deduction receipt, shall be deducted in the output tax.
The mentioned-above 3) item regulates specifically the about purchasing agricultural products. In accordance with the basic principles of value-added tax and international convention, if purchasing tax-free goods, it can not allowed to be deducted. Because the agricultural products are a special product, it is difficult to levy on the peasants, though the peasants don’t have to pay taxes, the agricultural products shall be levied taxes, if the tax included in the prices of purchased agricultural can not be deducted, the production on the circulation of agricultural ans other products with the agricultural materials as the ingredients shall bear relatively heavy tax burden, and it is allowed to deduct the tax on the cost of food of the prices of agricultural products.
Tax laws stipulate that the following input tax shall not be deducted from the output tax:
1) Purchase fixed assets.
2) The purchased goods or taxable labour service used in non-taxable projects. The so-called non-taxable projects refer to offering labour service taxable for business tax, transferring intangible assets, selling real estate and under-construction projects with fixed assets.
3) The purchased goods or taxable labour service used in tax-free projects;
4) The purchased goods or taxable labour service used for collective welfare or individual consumption;
5) The purchased goods of the non-party loss. The so-called non-party loss refers to the loss produced in the process of production and operation except the losses caused by parties, including natural disasters, losses caused by mismanagement ans other improper losses.
6) The purchased goods or taxable labour service used for the products and finished goods of non-party losses;
(3) Calculation on tax of small-scale taxpayers
Due to the unique characteristics of small-scale taxpayers themselves different from the general taxpayers, the request on calculating the added-value tax of small-scale taxpayers is different from that on calculating the added-value tax of the general taxpayers. The tax laws have the following request on calculating taxes levied on the small-scale taxpayers: firstly, small-scale taxpayers shall not use the value-added tax specific invoice when sell goods of offer taxable labour; secondly, the small-scale taxpayers shall not have the right to enjoy the right of deducting tax; thirdly, the tax shall be levied on the small-scale taxpayers. The calculation formula is :
The tax payable= sales amount× tax rate
Sales amount= tax-exclusive sales amount÷(1+ the leviable rate)
The Consumption Tax of Enterprises with Foreign Investment
The modern consumption tax is come into being in the 17 century, and then generally has promoted into the world, more than 100 countries had levied this tax or similar taxes around the world in the contemporary era. After the establishment of PRC, our country has levied special consumption behavior tax on the industries such as entertainment, feast, hotel and so on in 1950 which was canceled in 1953 when revising industrial-commercial tax. In 1988, China decided to levy the feast tax, in 1989, our country had levied the special consumption behavior tax on television and small cars. In 1993, for meeting the needs of development of socialist market economy,our country built structure of tax system crossed by general levying on value-added tax, special adjustment on consumption tax, and other projects with parts-levying. On the whole, the consumption tax is a tax levied for optimizing tax structure ans guiding correctly every aspects of consumption. Its legislative spirit shows the object of national industry policy and consumption policy and the macro-control on national economy. Thus, the consumption tax laws are good for the countries to guide correctly consumption, adjust the ability to pay, and also ensure the fiscal revenue of the state.
The Characteristics of Consumption Tax
The consumption tax is a newly-established tax in the tax reform in 1994, which belongs to circulation tax. Besides having the general characteristics of circulation tax, the consumption tax also has the following obvious characteristics:
(1) The consumption tax is a tax levied on specific consumer goods.
The consumption tax is not levied on all consumer good, it is just levied on the specific consumer goods stipulated in the tax laws. The levying scope of consumption tax shall be ensure by the country in accordance with the current consumption structure and consumption level and considering the needs of finance and taking lessons from legislative experience of foreign countries. Generally speaking, the levying scope of consumption tax is limited to Non-necessities such as luxuries, luxurious consumer goods, non-renewable resources and so on. Therefore, we can say that the consumption tax is a tax that can be bore by those with higher consumption capacity.
(2) The consumption tax set respectively different tax items on different articles of consumption, and implement tax rate with differential percentage and tax rate with differential proportion. The consumption tax is a tax that the country uses tax lever to make special adjustment on articles of consumption and arrange the different tax items and tax rates on different articles of consumption with considering the consumption ability and the consumption guide, and the level of the average tax rate of consumption tax is relatively high.
(3) Single taxable level
The levy objects of consumption are mainly the final articles of consumption, the general single tax levying is adopted. The levying links shall be any link in the production, wholesale, retail of consumption. Taxable consumption produced in the territory of China shall be levied when sold; consumption in commissioned processing shall be levied when picked up by the entrusted party; imported consumption shall be levied when reported to be imported.
(4) The consumption tax belongs to the ad valorem sales tax
The taxable amount of consumption tax is calculated by the means of setting tax rate by price or setting quota by quantity in China, od which the tax basis is the sales amount made up of costs, profits and consumption including all receivable fees and all additional fees received through selling consumption, but not including the receivable value-added tax amount.
2. Taxpayers for Consumption Tax
In accordance with the stipulations in Provisional Regulations on Consumption Tax, all the entities and individuals that produce,commission processing and import the articles of consumption stipulated in Provisional Regulations on Consumption Tax are the taxpayers for consumption tax. Among them, the entities include state-owned enterprises, collective enterprises, private enterprises, joint-stock enterprises, foreign-invested enterprises, foreign enterprises and other enterprises, and administrative units, public institutions, military units, social organizations and other units. Individuals include individual operators,Chinese citizens, foreign citizens.
3. The Levying Scope of Consumption Tax
The levying scope of consumption tax is ensured mainly according to the present conditions of economy ans development, consumption policies, consumption structure and the need of finance, thus, the adjustable range of consumption mainly focus on the following articles of consumption:
The special consumption that do harm to human health, ecological environment and social order due to over-consumption, such as cigarettes and wines , firework
Articles of luxury, non-necessities, such as jewelry, make-up and so on;
High-grade articles of consumption and highly energy-wasting articles of consumption, such as small cars, motorcycles;
Non-renewable and irreplaceable Petroleum consumption, such as cars and others;
The products with certain financial meaning, such as auto tyre and others;
The levy range of consumption tax shall be divided into taxable articles of consumption produced by taxpayers for sales, taxable articles of consumption, articles of consumption with commissioned processing made by taxpayers selves for self use and imported and taxable articles of consumption by the origination and functions of articles of consumption.
4. Tax Items and Tax Rate of Consumption Tax
To ensure the reason levy and payment of consumption tax, the tax laws list the taxable articles of consumption specifically into 11 tax items and 13 sub-tax-items, that is: cigarettes, wines and alcohol, cosmetic, Skin-care and hair-care products, expensive jewelry,diamonds and jade, fireworks, gasoline, diesel oil, auto tyre, motorcycles, small cars. The set of tax items of consumption tax basically insist the principles of tax item simplification, scientific division, specific keystones, clear objects, appropriately care for the history habits. Comparing to the tax items of tax on primary products and value-added tax, the tax items of consumption tax shall be set into three types: first is to keep the orifinal tax items, such as cigars, tobacco, white wine and so on; second, merger and modification of the tax items of tax on the primary products and value-added tax; third is newly tax items, such as motorcycles, small cars and so on
The current consumption tax adopts the two forms percentage tax rate and fixed tax rate. The percentage tax rate has 10 levels from 3 percents to 45 percents, the fixed tax rate has 4 levels. For the two or more taxable articles of consumption produced and sold by tax payers but not calculating respectively the sales amount and sales quantity, or the taxable commodities that are applicable to use different tax rates form a set of articles of consumption for sales, shall adopt the highest tax rate.
5, The Calculation of Taxes
The calculation of consumption amount adopts the methods of ensuring the consumption amount under quantity or ensuring the tax rates under prices. If adopting the latter method, the calculation formula is: tax payable of consumption taxable equals to taxable consumption plus consumption tax rate. If adopting the former method, the calculation formula is: tax payable equals to quantity of taxable consumption plus unit tax amount. In the foregoing formulas, the tax payable equals to consumption taxable including three types:
1) The taxable consumption produced in territory of China, includes the taxable consumption used to change for production materials and consumption materials,invest in capital, offset debts, and other taxable consumption with compensable transfer of ownership. If the articles of consumption made by the producers themselves are used for self-use, and used directly in production in borderland with generating expenses, the articles of consumption shall not pay consumption tax.
2) The taxable articles of consumption under commissioned processing. The taxable articles of consumption under commissioned processing by factories and plants are limited to that the entrusting party shall provide raw materials and main materials, but the entrusted party shall only charge processing fees or reimburse expenses for supporting materials, if the entrusting party offer raw materials , or the entrusted party accepts the commissioned processing of materials, the articles of consumption do not belong to commissioned processing consumption shall be regarded as self-made taxable consumption to be levied the consumption.
3) imported taxable consumption
Adopting the method of calculating under quantity, the quantity of taxable consumption in the formula shall be ensured in the following methods:
1) The articles of consumption for sales, its sales quantity is the quantity of taxable consumption;
2) The self-produced taxable consumption for self use, the transferred and used quantity is the the quantity of taxable consumption;
3) The articles of consumption under commissioned processing, the quantity of articles of consumption the entrusting party recovered is he the quantity of taxable consumption. The tax laws of PRC also proscribed the conversion standard on ton and liter when calculating consumption tax.
If adopting the method of ensuring the tax rates under the prices, the sales amount of taxable consumption in the formula refers to the all incomes gained from selling articles of consumption, including the additional fees, but not including the value-added tax. Self-produced articles of consumption foe self-use shall be levied tax in accordance with the average sales price of the kind of articles of consumption produced by taxpayers. If there is no such average sales price of the same kind of articles of consumption, the sales amount of taxable consumption shall be calculated in accordance with compound prices for taxation. The calculation formula of compound prices for taxation id: compound prices for taxation=(cost+profits)÷(1－ consumption tax rate). The cost in the formula refers ti the producing costs of taxable consumption, the rules and regulations of our country have specific prescription. The articles of consumption under commissioned processing whose sales amount shall be calculated in accordance with the average price of the same kind of articles of consumption of the entrusted party. The average price of the same kind of articles of consumption is the sales price of the same kind of articles of consumption in the current month. If the sales price of the same kind of articles of consumption in the current month is different from that in other months the sales amount shall be calculated in the average sales price of the same kind of articles of consumption, but not including the articles of consumption under the following conditions: first, the sales price is low obvious without any proper reasons; second, have no sales prices. The articles of consumption without having the average price in the same kind of articles of consumption shall be calculated in the composite assessable price. The imported taxable articles of consumption shall be levied the tax in accordance with composite assessable price. The tax authority has the right to assess and determine the tax, if the price of taxable articles of consumption is low obviously without any proper reasons. In accordance with the stipulations, the taxable prices of the cigarettes, grain, and white wines in class A shall be assessed and determined by the state administration of taxation; the prices of taxable consumption shall be assessed and determined by the tax bureau in provinces, autonomous regions and municipalities; the taxable price of the imported articles of consumption is assessed and determined by the customs. The sales amount of taxable articles of consumption used for changing for production materials and consumption materials, investing in capital or offset against the debts shall be calculated based on the taxable basis that is the highest sales prices of the same kind of articles of consumption in the same period of taxpayers. If the taxable articles of consumption are made up of the taxable articles of consumption and non-taxable articles of consumption or the taxable articles of consumption applicable to different tax rates, the whole sale amount shall be levied in the highest rate of taxable articles of consumption.
The consumption tax is a tax levied on the taxable articles of consumption consumed in the territory of China, thus, the consumption tax on the domestic articles of consumption shall be not allowed to be cut. But considering that the products that are encouraged to be exported and exported products have not been consumed in the territory of China, international general practice is to implement tax free on the exported articles of consumption. Our tax laws also adopt the international general practice that is to implement tax free or tax refund. There are several specific conditions as follows: first, implement exemptions and deductions on the exported taxable articles of consumption, which is applicable to the conditions that the foreign trade enterprises with export right purchase articles of consumption for directly export or the foreign trade enterprises are entrusted to export taxable articles of consumption by other foreign trade enterprises. Second, self-export enterprises or self-produce enterprises authorize other foreign trade enterprises to export taxable articles of consumption, the consumption tax shall be exempted in accordance with the actual export quantity. Third,no tax refund or no tax exemption on export, which is applicable to other enterprises except the production enterprises and foreign trade enterprises.
The business tax refers to a tax levied on the turnover gained from offering taxable labour services, transferring intangible assets or selling real estates in the territory of China. The business has the advantages that are wide levying scope, widespread tax resources, light tax burden and balance on the tax burden, simple and convenient calculation method. Consumption tax is carried out by way of tax within price in accordance with tax rates of tax items. The business tax shows the national industry policies well, and promotes the coordinated development among industries, helps enterprises compete equally on the basis of equalization of tax payment, and guarantee that the country can collect financial capitals widely. Therefore, since the tax system reform in 1984, the busness tax has always been on e of the main taxes levied on the foreign-invested enterprises.
1. The Characteristics of Business Tax
In nature, the business tax is a behavior tax, that is to say the business tax shall be levied once the taxable operations occur and gain operation incomes, thus, the business tax can also be circulation tax to some extent. The business tax shall have the following characteristics:
(1) Wide levy range, many tax resources. The levy range of business tax including transportation industry, architecture industry, financial insurance industry, post and communication industry, cultural and sports industry, entertainment industry, services industry, transfering intangible assets, selling real estates. These entities and individuals engaged in the mentioned-above operation in the territory of China, shall pay the business tax, which is the reason why the levy range of business tax is wide, and the tax resources are widespread.
(2) Set tax items and tax rates, and balance tax burden in accordance with different industries. Set tax items and tax rates in accordance with the different industries, and the different characteristics of industries, and different business, that is one industry shall adopt one tax rate, different industries shall adopt different tax rates, the tax burden is relatively under balance, which reflects the principles of fairness on tax burden.
(3) Simple and convenient calculation. The business tax has two tax rates 3 percents or 5 percents as basic taxes, and shall be levied on the business volume, the calculation method is very simple and convenient.
Taxpayers for Business Tax
In accordance with the stipulations in Provisional Regulations of People’s Republic of China on Business Tax, these entities and individuals such as offer taxable labour, transfer the intangible assets or sell real estates shall be the taxpayers for business tax. These entities include state-owned enterprises, collective enterprises, private enterprises, joint stock enterprises, foreign-invested enterprises, foreign enterprises, other enterprises, administrative units, public institutions, military units ans social organizations. Individuals refer to the individual industrial-commercial businesses and Chinese citizens and foreign citizens with taxable operation.
2. The Levy Range of Business Tax
The levy range of business tax refers to the three concrete behaviors as offer the taxable labour service, transfer intangible assets and sell real estates, including the specific types as follows:
(1) The behaviors of offering taxable labour services. The taxable labour services refer to all taxable labour services with the nature of commerce except processing, repair, and replacement. The taxable labour is divided into the following categories:
1) Transportation industry, refers to the business activities that the goods or travelers are transferred to the destinations by using transportation tools or manpower, animal power for the purpose of making their space position changed including land transportation, waterway transportation, airline transportation, pipeline transportation, loading and unloading transportation and so on;
2) Architecture industry, refers to works of architecture installment projects, including architecture, installment, repair, decoration, and other works;
3) Financial insurance industry, refers to the business specialized in conducting delivery, including post and telecom;
4） Cultural and sports industry, refers to the business engaged in managing the cultural and sports activities, including many cultural and sport activities such as performances, play, exhibition, training, sports competition and so on
5) Entertainment, refers to the business that offer places or services for entertainment activities, including managing entertainment places such as dance bars, singing halls, karaoke lounges, commercial music halls, music tea halls, billiards, golf, bowling and amusement facilities ans so on, and the business that the entertainment places offer service to the customers for carrying out entertainment activities;
6) Service industry, refers to the businesses that use facilities, tools. Places, information or technology to offer the society service, including agency, hotel, catering, tourism, warehousing, leasing, advertising and other services.
(2) The behavior of transferring intangible assets. Transferring intangible assets refers to the behaviors of transferring the ownership of the intangible assets or the right to use the intangible assets, including transferring the land use right, trademark right, patent right, non-patented technology, copyright and transferring commercial reputation. The behaviors of subscribing shares by intangible assets, taking part in and accepting the profits allocation of investment party, and sharing the investment risks together shall not be levied the business tax. If transferring the stock rights hereof, it shall pay the business tax.
⑶Behaviors of selling real estates. Selling real estates refers to the behavior of paid transferring the ownership of real estates including selling architecture, concrete structure, or other things immovably attached to the land. The behaviors of subscribing shares by intangible assets, taking part in and accepting the profits allocation of investment party, and sharing the investment risks together shall not be levied the business tax. The behavior that entities denote real estates to others without payment shall be regarded as selling real estates and levied the business tax.
The calculation of the business tax is quite simple, the calculation formula is: tax payable= business taxes × tax rates. We can know that the key point of calculating the payable business tax is to make sure of the turnover of taxpayers. In accordance with tax laws and regulations, there shall be different methods to ensure the turnover of different kinds of businesses. The specific methods are:
(1) the turnover of transportation industry includes passenger fees, charges on the loading and unloading, other transportation fees and insurance fees on catering included in the transport tickets and attached tickets, all kinds of fund for projects of transportation construction and so on. The transportation enterprises engaging in multimodal transport business shall pay business tax on its actual incomes which is regarded as turnover. So-called actually-gained incomes refer to the balance that is gained from the gained incomes deduct the transportation fees, loading and uploading fees, charges foe transshipment and others paid to the latter carriers, when the transportation enterprises doing multimodal transport business.
For transportation enterprises such transfer the passengers or goods from China to Foreign countries , and the passengers or goods will be transferred to be carried by other transportation enterprises, the balance that is gained by the through freight minus the transportation fees paid to the carriers shall be regarded as the turnover.
(2) The turnover of the architecture installment consists of the works prices gained in construction, repair, installment, decoration, and other works and all kinds of additional fees. For the general contractor subcontract the works to others, the balance that is gained from the the whole contract price of works minus the fees paid to the subcontractors shall be regarded as the turnover. For the entities or individuals sell the self-built buildings, the turnover of the self-built behaviors shall be calculated on the composite assessable prices.
(3) The turnover of financial insurance include the loan interests, profits, the incomes from transferring financial commodities ans the handling fees of engaging in the fiance brokerages and other financial businesses. The turnover of the insurance refers to insurance fees gained in the insurance business. The turnover of the self-capital lending business is the interests gained by the lending of self-capital of the taxpayers; the turnover of re-lending business is the balance gained from the loaning interests minus the lending interests; the turnover of the funding and renting business is the balance gained from the renting fees plus the residual value of the equipment minus the purchase price; the turnover of the finance brokerages is the handing charge gained from doing the fiance brokerages businesses. The fines, interest penalty, rising interest rates ans other incomes shall be added into the turnover and be levied the business tax.
(4) The turnover of the post and telecom include the turnover of the post business and the turnover of the telecom business. The turnover of P & T service refers to the incomes from delivery, post, circulation of newspapers and periodicals, sales on postal articles, postal savings, and other postal savings. The turnover of the telecom business refers to offer the installment of telegram, telephone, telex, telephone set, and sales on the articles of telecom and other telecom business.
(5) The turnover of the cultural and sports business shall be calculated in two ways: first, performed by entities or individuals, the turnover is the incomes gained from the tickets prices or the balance gained from the the fees for booking whole theater minus the site cost and brokerage fees; second, the turnover of the sightseeing places refers to the tickets fees sold by the parks, zoos and other sightseeing places, not including the incomes gained from engaging in other amusement activities and operation.
(6) The turnover of the entertainment places includes all the fees such as the tickets, table fees, charges on ordering songs, fees on cigarettes ans wines, fees on drinks ans so on.
(7) The turnover of service industry includes operation incomes of all kinds of services. For the travel companies that organize group travel to overseas countries which is taken over by other travel companies outside of China, the balance gained from the whole-journey travel fees minus the fees paid to the companies that take over the travel group shall be the turnover.
(8) The turnover of transferring intangible assets is the transferring incomes of the intangible assets.
(9) The turnover of selling real estates includes all the prices collected from the purchasing party ans additional fees.
The Customs Tax of Foreign-invested Enterprises
The customs tax refers to a tax that is levied on the circulation incomes of the goods ans articles across the territory of customs and borders by the national customs in accordance with the national laws. The customs tax is divided into two kinds: exported customs tax and imported customs tax. The customs tax can safeguard economic sovereignty and is good for protecting domestic goods when competing with the the same kind of imported goods, and is in favor of promoting the production of exported goods and increase of the state revenue, thus, the customs tax is an independent and significant tax item. The customs tax is a unified border tax., which is levied uniformly bu national customs and an important formality to implement national economic policy.
The levy object for customs tax is the goods and articles across the customs or the border. The articles refer to the luggage and articles carried around by the tourists when entering the border. For foreign-invested enterprises, the customs tax mainly is levied on the goods that are imported or exported across the border. Customs Import & Export Tax Tariff of The People’s Republic of China established in 1992 classifies the taxable commodities into 21 categories, 6250 tax items. On that basis, there are tax rate on exported goods and tax rate on imported goods in our tax rates. The imported tax includes general tax rate and preferential tax rate. The customs tax is levied according to the prices. Thus, the key of calculating the customs tax is the duty-paid value of exported & imported goods. There are several methods to ensure the duty-paid value of goods as follows:
1. Duty-paid price of import price. In accordance with Article 38 in Customs Laws, C.I.F value of the imported price after the assessment and determination by the customs is the duty-paid price. The normal C.I.F includes the normal wholesale price assessed and determined by the customs and the freight, insurance, and handling charges and others of the imported goods that have arrived at the destination within China and have not been unloaded; in the event of the wholesale price of the imported goods assessed and determined by the customs but unsure, the customs shall assess the duty-paid price by transaction value standard on the same kinds of goods, transaction value standard on the similar goods, the international price method, domestic market price deduction method and others. Transaction value standard on the same kinds of goods refers to take the price of the same kind of goods purchased in the same exporting country or region as the duty-paid price ; Transaction value standard on the similar goods refers to take the transaction price of the similar goods as the duty-paid price ; the international price method refer to assess and determine the duty-paid price based on the open transaction prices of the same kind goods or similar goods in international market; domestic market price deduction method refers to take the balance gained from the wholesale prices of the same kind or similar goods deduct the reasonable value-added tax, normal freight, storage fees, operating expenses and profits as the duty-paid price.
2. The duty-paid price of exporting the imported goods. The duty-paid price of the imported goods that is exported out of the territory such is declared to the customs and transported out of territory within the limit time for exporting the imported goods prescribed by the customs shall be calculated accordance with the following two conditions：
(1) In the event of mechanical appliances, means of transportation or other goods transported to outside of China for repair, the normal fees for repair and charges on the materials shall be regarded as the duty-paid price;
(2) For the goods transported to outside of China for processing, the difference of FOB of importing processed goods and FOB of importing the originally imported goods shall be regarded as the duty-paid price. If can not get the FOB of two kinds of goods, or take the difference of the CIF of two kinds of goods as the duty-paid price, the CIF of the same kind or similar goods when import or FOB of the originally exported goods when declaring for export shall be regarded as the duty-paid price instead. Besides, the charges on materials used for the originally exported goods paid in outside of China ,the processing charges, freight, insurance, service fees ans others of the goods that have arrived in the customs of China and have not been uploaded shall be regarded as the duty-paid price.
3. For imported goods by renting, the rental of the imported goods examined and determined by the customs shall be regarded as the duty-paid price;
4. The duty-paid price of export goods. In accordance with the stipulation on Regulations of the PRC on Import and Export Duties, the difference between the FOB of goods that is examined and approved for export and the customs tax for export shall be regarded as the duty-paid price. If FOB unsure, the duty-paid price shall be assessed and determined by the customs.
Other Taxes for Enterprises with Foreign Investment
1. Resource Tax
Resource tax is a tax levied on the differential incomes caused by taxable resources developed or produced by entities and individuals within the territory of China. Resource tax is good for safeguarding the natural resources, and also in favor of shortening the incomes difference in the aspect of developing and utilizing resources among enterprises due to different natural conditions. In accordance with Circular on Question Related to Provisional Regulations Concerning Taxation Including Value-added Tax, Consumption Tax and Business Tax Applicable to Enterprise with Foreign Investment and Foreign Enterprises issued in Feb, 2nd , 1992 by the State Council, The Provisional Regulations of The People's Republic of China on Resource Tax issued in Dec 22nd , 1993 by the State Council shall apply to enterprises with foreign investment. As prescribed in this regulation, the enterprises with foreign investment exploring the mining products and producing salts prescribed by laws within the territory of China shall be the taxpayers for resources tax. The entities purchasing taxable mining products or salts shall be withholding agents for resource tax.
The levy scope of resource tax includes petroleum, coal, natural gas,, other non-metal ores, ferrous metal ores and non-ferrous metal ores and seven kinds of solid salt. But it shall be paid attention to that the levy scope of resource tax shall be limited in the primary Products made from the raw materials or natural resources gained by explorers, not including the processed products.
2. Stamp Tax for Enterprises with Foreign Investment
The stamp tax is a tax levied on the receipt formed and received in the process of economic activities ans economic communication, which is one of behavior taxes. The stamp tax shall paid by taxpayers themselves, and the levy scope is quite wide. The Provisional Regulations of The People's Republic of China on Stamp Tax issued in Aug 6th, 1988 by the State Council apply to the enterprises with foreign investment. As prescribed in the regulation, the the receipt that is formed and received by enterprise with foreign investment within the territory of China shall be levied the stamp tax. In accordance with the stipulation in The Interim Regulations of The People's Republic of China on Stamp Tax , the receipt that is formed in the territory of China and protected by our laws also shall be levied stamp tax.
The levy object for stamp tax is the receipts prescribed in tax laws, including:
Purchase and sales, process , contract on the construction, property lease, transportation, warehousing storage, property insurance, technology contract, the receipt with the nature of contracts;
Instruments of property transfer;
Business account books ;
rights certificates and licenses
The stamp tax adopts the percentage tax rate and fixed tax rate, two kinds. The receipts with being written the amount of money shall adopt the percentage tax rate, for the right certificate and license unable to calculate the sum or the instrument with indicating the sum but unreasonable distinctly as the evidence for tax payment, shall adopt the fixed tax rate. There are 14 tax items, and the tax rates are divided into six levels, that is : 0.5 percent, 0.1 percent, 0.05 percent, 0.03 percent, 0.005 percent, 0.003 percent
3. Vehicle and Vessel Usage License Plate Tax for Enterprises with Foreign Investment
The vehicle and vessel usage license plate tax is a tax levied on the vehicles drove in public roads and the vessels sailing in domestic rivers ans lakes, coastal port,calculated on the basis of its category, tonnage and stipulated tax, which is one of behavior taxes. In accordance with Circular on Question Related to Provisional Regulations Concerning Taxation Including Value-added Tax, Consumption Tax and Business Tax Applicable to Enterprise with Foreign Investment and Foreign Enterprises issued in Feb 22nd, 1994 by the State Council, the vehicles stipulated to be used by the enterprises with foreign investment shall be levied the vehicle and vessel usage license plate tax. The unit of calculating the vehicle and vessel usage license plate tax is numbers of the vehicles used, net tonnage or dead-weight capacity, and shall be levied based on the quantity.
4. The Property Tax for Enterprise with Foreign Investment
The property tax is a tax levied on the property owners in a certain percentage of property value in accordance with the contracts signed by the property owners, when transferring or altering the ownership of land, houses, which is one of the property tax. In accordance with The Provisional Regulations of The People's Republic of China on Property Tax issued in June 7th, 1997 by the State Council, the enterprises with foreign investment contracting lands and houses shall pay for the property tax. The tax bases of property tax are: first, in the event of transferring the the right to use state-owned land, selling land use rights and selling houses, the tax basis is the transaction price; secondly, for donating the land-use rights ans houses, tax authority shall refer to the market price of selling land-use rights, houses dealings to assess and determine the tax basis; thirdly, for changing the land-use right ans houses, the difference between the prices of exchanged land-use rights and exchanged houses shall be regarded as the tax basis. The tax rate of property right is 3 percents to 5 percents, the detailed tax rate is determined in accordance with the actual conditions by provinces, autonomous regions, municipalities with the range of 3 percents to 5 percents.
5. The Land Value Increment Tax for Enterprises with Foreign Investment
The land value increment tax refers to a tax levies on the entities and individuals for added value gained from transferring the rights to use state-owned land, the property rights of land, buildings and attachments, which is one of the resources taxes. In accordance with The Provisional Regulations of The People's Republic of China on The Land Value Increment Tax issued in Dec 13th, 1993 by the State Council, the enterprises with foreign investment such transfer real estates and gain the corresponding added values shall pay the value-added tax. The tax basis is the added value gained from transferring real estates by the taxpayers. That is the difference between the incomes gained from transferring real estates and the costs and expenses. The incomes obtained from the transfer of the real estates include the monetary proceeds, proceeds in kind and other proceeds. The tax rates include the followings: 30 percents, 40 percents, 50 percents, 60 percents.
6. Building Taxes for or Enterprises with Foreign Investment
Building Tax is levied in real estates in cities, county towns, state designated townships and industrial and mining areas and paid by the owners or the users of real estates in accordance with the value of real estates, which is with the nature of property tax. The current legal basis for the building tax is The Provisional Regulations of The People's Republic of China on The Building Tax issued in Nov. 1986 by the State Council. In accordance with the regulation, the enterprises with foreign investment such own the house property, shall pay the building tax. The building tax shall be paid by the building owners, and levied depending on the price of the property, and the annual tax rate is 1.2 percents; the building tax levied depending on the rental, the annual tax rate is 12 percents.
Besides, the enterprises with foreign investment may pay the slaughter tax, urban real estate tax, urban maintenance and construction tax ans others. There are few cases that the enterprises with foreign investment get involved into the the slaughter tax, urban real estate tax, urban maintenance and construction tax ans others.