Rules for the Implementation of the Law of the People’s Republic of China on the Administration of Tax Collection

(Promulgated by Decree No. 362 of the State Council of the
People’s Republic of China on September 7, 2002, and effective as
of October 15, 2002)

Chapter I General Provisions

Article 1 These Rules are hereby formulated in
accordance with the provisions of the Law of the People’s Republic
of China on the Administration of Tax Collection (hereinafter
referred to as the Law on the Administration of Tax
Collection).

Article 2 The Law on the Administration of Tax
Collection and these Rules apply to the collection of various taxes
by tax authorities according to law. In case where there is no
provision in the Law on the Administration of Tax Collection and
these Rules, the provisions of other tax laws, tax administrative
rules or regulations shall be implemented.

Article 3 Decisions made by any department,
unit or individual that contravene the tax laws, tax administrative
rules or regulations shall be null and void. Relevant tax
authorities shall not implement these decisions and shall report to
tax authorities at a higher level.

Taxpayers shall fulfill their obligation of tax payment in
accordance with the provisions of tax laws, tax administrative
rules or regulations. Contracts, agreements and other documents
signed by taxpayers that contravene tax laws, tax administrative
rules or regulations shall be null and void.

Article 4 The State Administration of Taxation
shall be responsible for formulating overall plans, technical
standards, technical designs and implementing measures in the
construction of national taxation information system. According to
the overall plans, technical standards, technical designs and
implementing measures formulated by the State Administration of
Taxation, tax authorities at various levels shall work effectively
in the construction of taxation information system in their
respective regions.

The local people’s governments at various levels shall give
positive support to the construction of the taxation information
system and organize the related departments to have the relevant
information shared.

Article 5 Information to be kept confidential
for taxpayers and tax withholding agents, as stipulated in Article
8 of the Law on the Administration of Tax Collection, refers to the
commercial secret and individual privacy of taxpayers and tax
withholding agents. Any violation of tax law by taxpayers and
withholding agents does not fall within the scope of
confidentiality.

Article 6 The State Administration of Taxation
shall formulate the norm of conduct and standard of service for tax
officials.

Tax authorities at a higher level shall promptly rectify any
violation of tax law by tax authorities at a lower level upon
discovery. Tax authorities at a lower level shall promptly correct
their violation of tax law according to the decision of tax
authorities at a higher level.

Tax authorities at a lower level shall report to tax authorities
at a higher level or relevant department upon discovering any
violation of tax law by tax authorities at a higher level.

Article 7 Tax authorities shall grant awards to
offence reporters on the basis of their contributions. Funds needed
to pay these awards shall be included in the annual budget of the
taxation department and approved separately. The specific measures
and standard for the use of award-funds shall be formulated by the
State Administration of Taxation jointly with the Ministry of
Finance.

Article 8 When assessing the amount of tax
payable, adjusting the amount of fixed tax payment, conducting tax
inspection, imposing tax administrative penalties, or conducting
tax administrative reconsideration, tax officials shall recuse
themselves if they have any of the following relationships with the
taxpayer, or tax withholding agent, or its legal representative, or
the direct responsible person:

(1) spouse relationship;

(2) lineal blood relationship;

(3) collateral blood relationship within three generations;

(4) close relative by marriage; or

(5) any other interests relationship that may influence
impartial law enforcement.

Article 9 Taxation organs established according
to provisions of the State Council and made known to the public, as
stipulated in Article 14 of the Law on the Administration of Tax
Collection, refer to the investigation bureaus of the tax bureaus
or offices below the provincial level. The investigation bureaus
are specifically responsible for the investigation and handling of
cases involving tax evasion, avoidance of pursuance of tax in
arrears, tax fraudulence, and refusal to pay tax.

The State Administration of Taxation shall clearly define the
respective functions of the tax bureau or office and the
investigation bureau to avoid any overlap between them.

Chapter II Tax Registration

Article 10 Local offices of the State
Administration of Taxation and local tax bureaus shall use the same
code for tax registration of the same taxpayer and share
information.

The specific measures for tax registration shall be formulated
by the State Administration of Taxation.

Article 11 The administrative departments for
industry and commerce at every level shall periodically notify the
local offices of the State Administration of Taxation and local tax
bureaus at the same level of the situations of issuance,
alteration, cancellation and revocation of business licenses.

The specific measures for notification shall be formulated by
the State Administration of Taxation jointly with the State
Administration for Industry and Commerce.

Article 12 Taxpayers engaged in production or
business operation shall, within 30 days from the date of obtaining
their business licenses, file written applications for tax
registration with the competent tax authorities in the localities
where the production or business operation is conducted or where
the tax obligation occurs. They shall truthfully complete the tax
registration form and submit the relevant certificate, documents
and information as required by tax authorities.

Taxpayers other than those mentioned in the preceding paragraph,
except State organs and individuals, shall, by presenting relevant
documents, go through the procedure for tax registration with the
competent tax authorities in their localities within 30 days from
the date of occurrence of tax obligation.

Measures for tax registration of individual income tax by
taxpayers shall be separately formulated by the State Council.

The sample of tax registration certificate shall be determined
by the State Administration of Taxation.

Article 13 Tax withholding agents shall, within
30 days from the date of occurrence of tax withholding obligation,
apply to local tax authorities for tax withholding registration and
obtaining the tax withholding registration certificate. In case a
tax withholding agent already has completed a tax registration
procedure, tax authorities may only record the tax withholding
obligation on its tax registration certificate and will not issue a
separate tax withholding registration certificate to the agent.

Article 14 When any change occurs in the
contents of tax registration, the taxpayer shall, within 30 days
from the date of completing the procedure for changing its business
license with the administrative department for industry and
commerce or any other department, apply to the original tax
registration authorities for changing its tax registration by
presenting the relevant certificates.

When any change occurs in the content of tax registration and
there is no need to make any change in the registration with the
administrative department for industry and commerce or any other
department, the taxpayer shall, within 30 days from the date of
such a change, apply to the original tax registration authorities
for changing its tax registration by presenting the relevant
certificates.

Article 15 Where, according to law, a
taxpayer’s obligation to pay tax terminates because of dissolution,
bankruptcy, cancellation or other reasons, the taxpayer shall,
before going through the procedure for cancellation of its
registration with the administrative department for industry and
commerce or any other department, apply to the original tax
authorities for cancellation of its tax registration by presenting
the relevant certificates and documents; where there is no need for
registration with the administrative department for industry and
commerce or any other department according to relevant provisions,
the taxpayer shall, within 15 days from the date of approval by
relevant department or declaration of the termination, apply to the
original tax authorities for cancellation of its tax registration
by presenting the relevant certificates.

Where any change in the taxpayer’s domicile or business site
involves the change of tax registration authorities, the taxpayer
shall, before going through the alteration or cancellation
procedure of registration with the administrative department for
industry and commerce or any other department, or before changing
the domicile or business site, apply to the original tax
registration authorities for cancellation of its tax registration,
and, within 30 days, apply for tax registration with the tax
authorities of the locality to which its domicile or business site
is transferred.

The taxpayer whose business license is revoked by the
administrative department for industry and commerce or whose
registration is cancelled by any other department shall, within 15
days from the date of its business license revocation or
registration cancellation, apply to the original tax registration
authorities for cancellation of its tax registration.

Article 16 Before going through the procedure
for cancellation of tax registration, the taxpayer shall settle all
taxes payable, surcharge on tax in arrears and penalties, and shall
hand over the invoices, tax registration certificate and other
taxation documents to tax authorities.

Article 17 The taxpayer engaged in production
or business operation shall, within 15 days from the date of
opening a basic deposit account or other deposit accounts, report
in writing all the account numbers to competent tax authorities, or
shall submit a written report to competent tax authorities within
15 days from the date of a change, if any.

Article 18 The taxpayer, except one who does
not need to obtain a tax registration certificate according to the
provisions, must present its tax registration certificate when
handling the following matters:

(1) opening bank accounts;

(2) applying for tax reduction, exemption or refund;

(3) applying for extension of tax declaration or deferral of tax
payment;

(4) purchasing of invoices;

(5) applying for a taxation certificate for business operation
outside of the locality;

(6) going through the procedure for termination or suspension of
business operation; or

(7) other matters regarding taxation.

Article 19 Tax authorities shall adopt a system
of periodic inspection and replacement of tax registration
certificate. The taxpayer shall go through certificate inspection
or replacement procedures with competent tax authorities within the
prescribed time limit by presenting the relevant certificates.

Article 20 The taxpayer shall hang up the
original tax registration certificate openly in the site of
production or business operation or in the office for inspection by
tax authorities.

In case the tax registration certificate is lost, the taxpayer
shall report within 15 days in writing to competent tax authorities
and make an announcement in the newspaper declaring the lost
certificate invalid.

Article 21 Where a taxpayer engaged in
production or business operation conducts production or business
operation activities temporarily in another county (city), it shall
present a copy of its tax registration certificate and the taxation
certificate for business operation outside of the locality issued
by the tax authorities in its locality to the tax authorities of
the intended county (city) for inspection and shall accept the tax
administration.

Where a taxpayer engaged in production or business operation
conducts business in a place outside of its locality, it shall go
through the tax registration procedure with local tax authorities
if the time of its production or business operation in the same
place exceeds 180 days in the aggregate.

Chapter III Administration of Accounting Books and
Vouchers

Article 22 Taxpayers engaged in production or
business operation shall, within 15 days from the date of receipt
of their business license or occurrence of tax obligation, set up
accounting books in accordance with the relevant provisions by the
State.

The accounting books as mentioned in the preceding paragraph
refer to general ledgers, detailed accounts, journal accounts and
other auxiliary accounting books. General ledgers and journal
accounts shall be bound into a book form.

Article 23 Taxpayers who are engaged in small
scale production or business operation and truly unable to set up
their accounting books may entrust any registered accountant office
or accounting personnel approved by tax authorities with account
establishment and book keeping. Taxpayers with real difficulty in
retaining such office or personnel may, upon approval by tax
authorities above the county level, set up a pasting book for
receipt and payment vouchers, a record book for purchase and sales
of goods, or use a tax control device, in accordance with the
provisions of tax authorities.

Article 24 Taxpayers engaged in production or
business operation shall, within 15 days from obtaining the tax
registration certificates, submit a report on the financial and
accounting systems or methods of financial and accounting
settlement to competent tax authorities for the record.

Taxpayers keeping book accounts with computers shall submit a
report on the accounting software applied to their computer
systems, the users’ manual and related documents, before using
them, to competent tax authorities for the record.

The computerized accounting systems set up by taxpayers shall be
in conformity with the relevant provisions of the State and shall
be able to correctly and completely calculate the receipts or
income of the taxpayer.

Article 25 Tax withholding agents shall, within
ten days from the date of occurrence of the withholding obligation
in accordance with the provisions of the tax laws, tax
administrative rules or regulations, set up separate accounting
books regarding the tax withheld and paid or the tax collected and
paid, pursuant to the categories of tax withheld or collected.

Article 26 If a taxpayer or tax withholding
agent has a sound accounting system and can use computers to
accurately and completely calculate the receipts and income, or the
tax withheld and paid or collected and paid, the complete written
record of accounts put out by the computer system may be regarded
as accounting books.

If the accounting system is not well-established, and the
computer system can not accurately and completely calculate the
receipts and income, or the tax withheld and paid or collected and
paid, the taxpayer or tax withholding agent shall set up a general
ledger and other accounting books related to tax payment or tax
withheld and paid or collected and paid.

Article 27 Accounting books, vouchers and
financial statements shall be made in Chinese. In national
autonomous areas, a nationality language in common use in the
locality may be used simultaneously. Foreign-funded enterprises and
foreign enterprises may use a foreign language simultaneously.

Article 28 Taxpayers shall install and use tax
control devices as required by tax authorities, and submit the
relevant data and information according to the provisions of tax
authorities.

The administrative measures for promoting the extensive use of
tax control devices shall be separately formulated by the State
Administration of Taxation and subjected to the State Council for
approval before the implementation.

Article 29 Accounting books, accounting
vouchers, financial statements, tax payment vouchers, invoices,
exportation vouchers and other tax-related documents should be
legal, authentic and complete.

Accounting books, accounting vouchers, financial statements, tax
payment vouchers, invoices, exportation vouchers and other
tax-related documents shall be maintained for 10 years, except as
otherwise stipulated in laws or administrative rules or
regulations.

Chapter IV Tax Filing

Article 30 Tax authorities shall establish and
improve a self-assessment system for taxpayers. Upon approval of
tax authorities, taxpayers or tax withholding agents may file tax
returns or submit statements on tax withheld and paid or collected
and paid to tax authorities by mail or by means of electronic data
transmission.

Electronic data transmission refers to such electronic means as
telephone, electronic data exchange, and network transmission
approved by tax authorities.

Article 31 Taxpayers filing tax returns by mail
shall use the special uniformed envelope for tax returns and keep
the receipt issued by the post office as evidence for return
filing. The date carried by the postmark for the posting day shall
be the actual date of returns filing.

Taxpayers filing tax returns electronically shall maintain the
relevant documents within the prescribed time limit according to
the requirement of tax authorities, and periodically submit them in
writing to competent tax authorities.

Article 32 Taxpayers with no due tax payment
during any taxation period shall also file tax returns according to
the relevant provisions.

Taxpayers enjoying a tax reduction or exemption shall file tax
returns in accordance with the relevant provisions during the
period of tax reduction or exemption.

Article 33 Tax returns by taxpayers or
statements on tax withheld and paid or collected and paid by tax
withholding agents shall include the main contents: tax categories
and items, taxable items or items on which tax is withheld and paid
or collected and paid, base of taxation, deduction items and
standard, applicable tax rate or fixed tax payment for each unit,
items and amount for tax refund, items and amount for tax reduction
or exemption, amount of tax payment or of tax to be withheld and
paid or collected and paid, period to which tax payment belongs,
deferred tax payment, tax in arrears and surcharge on tax in
arrears, etc.

Article 34 Taxpayers shall, at the time of
filing tax returns, fill in the tax returns truthfully and submit
to tax authorities the following relevant documents and materials
in the light of the requirements of different situations:

(1) financial and accounting statements and related explanatory
materials;

(2) contracts, agreements and vouchers related to tax
payment;

(3) electronic tax filing information generated by tax control
devices;

(4) taxation certificates for business operation outside of the
localities and corresponding tax payment vouchers;

(5) relevant certifying documents issued by public notaries
within or outside the Chinese territory; and

(6) other necessary documents or materials required by tax
authorities.

Article 35 Tax withholding agents making
statements on tax withheld and paid or collected and paid shall
complete the statements truthfully, and submit to tax authorities
the eligible vouchers for tax withheld and paid or collected and
paid and other relevant documents and materials required by tax
authorities.

Article 36 Taxpayers paying tax periodically at
a fixed amount may file tax returns in a simpler way and by
combining tax payment periods.

Article 37 Taxpayers or tax withholding agents
with real difficulty in filing tax returns or submitting statements
on tax withheld and paid or collected and paid within the
prescribed time limit and requiring an extension shall, within the
prescribed time limit, apply in writing to tax authorities for an
extension, which shall be handled within the time limit approved by
tax authorities.

In case taxpayers or tax withholding agents are unable, due to
force majeure, to file tax returns or submit statements on tax
withheld and paid or collected and paid within the prescribed time
limit, an extension is available. However, a report must be
submitted to tax authorities immediately after the force majeure
has vanished. The tax authorities will grant an approval after
ascertaining the facts.

Chapter V Tax Levying

Article 38 Tax authorities shall strengthen the
administration of tax levying and establish and improve a
responsibility system.

Tax authorities shall determine the mode of tax levying pursuant
to the principles of ensuring a timely and full remittance of tax
revenue to the state treasury, making it as easy as possible for
taxpayers to pay tax and reducing taxation cost.

Tax authorities shall strengthen the administration of tax
refund for export. The specific administrative method shall be
formulated by the State Administration of Taxation with the
relevant departments of the State Council.

Article 39 Tax authorities shall, pursuant to
the budget accounts and budget levels prescribed by the State,
remit in time to the state treasury all types of taxes, surcharge
on tax in arrears and penalties, and shall not occupy, embezzle, or
retain them, or remit them to any accounts other than the state
treasury or the tax revenue accounts prescribed by the State.

Any organization or individual shall not alter the budget
accounts or budget levels of tax, surcharge on tax in arrears and
penalties that have already been remitted to the State
treasury.

Article 40 Tax authorities shall, in accordance
with the principles of convenience, expeditiousness and safety,
actively popularize the use of check, bankcard and electronic
settlement for tax payment.

Article 41 Special difficulties mentioned in
Article 31 of the Law on the Administration of Tax Collection
include either of the following situations that a taxpayer is
confronted with:

(1) where force majeure has caused a great loss to the taxpayer
and significantly affected its normal production or business
operation; or

(2) where the taxpayer’s cash fund for the current period is not
enough to settle tax payment after deducting payment to employees
and social insurance premium.

The municipal offices of the State Administration of Taxation
and municipal local tax bureaus of the cities separately listed in
the State plan may approve the taxpayer’s application for a
deferral of tax payment with reference to the limit of power as
specified in paragraph 2 of Article 31 of the Law on the
Administration of Tax Collection.

Article 42 Taxpayers who are unable to pay tax
within the set time limit shall, before the expiration of that
limit, apply for a deferral and submit the following documents: the
written application for tax deferral, balance of currency funds for
the current period and statements of all deposit accounts in banks,
balance sheet, expenditure budget for salaries of employees, social
insurance premiums and so on, as requested by tax authorities.

Tax authorities shall, within 20 days from the date of receipt
of the application for tax deferral, decide whether or not to grant
approval. A surcharge shall be imposed upon the taxpayer from the
expiry date of the time limit for tax payment in case the deferral
is not approved.

Article 43 Taxpayers eligible for tax reduction
or exemption, as specified by laws or administrative rules or
regulations or as approved by statutory examining and approving
authorities, shall, by presenting the relevant documents, go
through the procedures for tax reduction or exemption with the
competent tax authorities. Taxpayers shall resume tax payment from
the date following the expiry date of the tax reduction or
exemption.

Taxpayers eligible for tax reduction or exemption shall report
to tax authorities within 15 days from the date of occurrence of
any change to the terms for tax reduction or exemption. Taxpayers
shall fulfill tax payment liabilities according to law when they no
longer meet the requirements for tax reduction or exemption; if
they fail to pay the tax according to law, tax authorities shall
pursue tax payment.

Article 44 Tax authorities may, in line with
the principles of being conducive to taxation control and making it
as easy as possible for taxpayers to pay tax and according to
relevant provisions of the State, entrust related units or
individuals with collection of small, scattered, or
outside-of-the-locality tax payment and shall issue to such units
or individuals a certificate for tax collection. The entrusted
units or individuals shall collect tax lawfully in the name of the
tax authorities pursuant to the requirement as stipulated in the
certificate, and taxpayers shall on no account refuse to pay tax.
In case of refusal by any taxpayer, the entrusted unit or
individual shall report without delay to the tax authorities.

Article 45 Tax payment vouchers mentioned in
Article 34 of the Law on the Administration of Tax Collection
refers to various types of tax payment receipts, letters of tax
remittance, duty stamps, tax withholding (collection) receipts and
other vouchers of tax payment.

Unless appointed by tax authorities, no unit or individual is
allowed to print any kind of tax payment voucher. Tax payment
vouchers shall not be lent, resold, altered or forged.

The sample of tax payment vouchers and the relevant
administrative measures shall be determined by the State
Administration of Taxation.

Article 46 Tax authorities shall, upon receipt
of tax, issue a tax payment voucher to the taxpayer. If the
taxpayer pays tax through banks, tax authorities may entrust the
bank with the issuance of the tax payment voucher.

Article 47 Where the taxpayer falls into any of
the circumstances listed in Article 35 or 37 of the Law on the
Administration of Tax Collection, tax authorities shall be entitled
to the right of assessing its amount of tax payable in any of the
following methods:

(1) referring to the tax burden of other local taxpayers engaged
in the same or similar business on a similar scale and with a
similar income;

(2) according to the method of business income or cost plus
rational expenses and profit;

(3) calculating or reckoning on the basis of raw materials,
fuels, power and others consumed; or

(4) by adopting any other reasonable method.

In case it is not adequate to correctly assess the amount of tax
payable by adopting one of the above-mentioned methods, two or more
methods may be adopted simultaneously.

In case the taxpayer objects to the amount of tax payable
assessed by tax authorities by adopting the methods as prescribed
in this Article, it shall provide relevant evidence to tax
authorities for recognition, upon which adjustment shall be made to
the amount of tax payable.

Article 48 Tax authorities are responsible for
grading taxpayers’ compliance credit. The method for grading
compliance credit shall be formulated by the State Administration
of Taxation.

Article 49 Any contractor or lessee who is
independent in both production or business operation and financial
accounting and who regularly pays contracting fees or rental to the
contract issuer or the lessor shall pay tax on its receipts and
income from production or business operation and accept the tax
administration, except as otherwise provided by laws or
administrative rules or regulations.

The contract issuer or lessor shall, within 30 days from the
date of issuance of contract or leasing, report the information
about the contractor or lessee to the competent tax authorities.
Otherwise, the contract issuer or the lessor shall assume the joint
and several tax liabilities with the contractor or lessee.

Article 50 Taxpayers shall report to the
competent tax authorities before liquidation in case of
dissolution, cancellation or bankruptcy. The competent tax
authorities shall participate in the liquidation in case the tax
payment is not settled.

Article 51 The associated enterprises mentioned
in Article 36 of the Law on the Administration of Tax Collection
refer to companies, enterprises or other economic entities that
have one of the following relationships:

(1) direct or indirect ownership or control of each other in
relation to capital, business operation, purchase, sale, etc;

(2) direct or indirect ownership or control of both or all by a
third party; or

(3) other associated relationships in terms of interest.

Taxpayers have an obligation to provide the local tax
authorities with information on prices, expenditure standard and
others concerning business transactions with their associated
enterprises. The specific measures shall be formulated by the State
Administration of Taxation.

Article 52 Business transactions between
independent enterprises as mentioned in Article 36 of the Law on
the Administration of Tax Collection refer to business transactions
between enterprises with no associated relationship at fair market
prices and following normal business practice.

Article 53 The taxpayer may propose to the
competent tax authorities a pricing principle and calculation
method for business transactions with its associated enterprises.
The competent tax authorities may, after examination and approval,
agree upon the items of pricing with the taxpayer in advance and
supervise over the implementation.

Article 54 Tax authorities may adjust the
taxpayer’s amount of tax payable in one of the following situations
in business transactions between the taxpayer and its associated
enterprises:

(1) purchases and sales are not priced according to business
transactions between independent enterprises;

(2) the interest paid to or charged by the financing enterprise
is over or below the amount acceptable for enterprises with no
associated relationships, or the interest rate adopted is higher or
lower than the normal rate for the same type of business;

(3) charge for service is not collected or paid as it normally
occurs between independent enterprises;

(4) business transactions such as transfer of property or
provision of right to use property are not priced or charges are
not collected or paid as they should be in business transactions
between independent enterprises; or

(5) other circumstances where business transactions are not
priced in accordance with the normal practice between independent
enterprises.

Article 55 In case any
taxpayer falls into one of the circumstances listed in Article 54
of these Rules, tax authorities may adjust the taxpayer’s taxable
receipts or income according to the following
methods:

(1) according to the price for the same or similar business
transactions between independent enterprises;

(2) according to the level of income and profit obtainable on
the basis of the resale price to a non-associated third party;

(3) according to the method of cost plus reasonable expenses and
profit; or

(4) according to other appropriate methods.

Article 56 When payment or receipt of prices or
charges in business transactions between a taxpayer and its
associated enterprise is not made as it should be with business
transactions between independent enterprises, the tax authorities
shall make adjustment, within three years after the first tax year
for such transactions, or under special circumstances within ten
years after the first tax year for such transactions.

Article 57 Taxpayers engaged in production or
business operation without completing formalities for tax
registration as mentioned in Article 37 of the Law on the
Administration of Tax Collection include those conducting
production or business operation in another county (city) without
reporting to local tax authorities for registration.

Article 58 The taxpayer shall pay tax within 15
days from the date when the tax authorities impound its commodities
or goods in accordance with Article 37 of the Law on the
Administration of Tax Collection.

As for the impounded commodities or goods which are live and
fresh, apt-decaying or easy-deactivating, the tax authorities may
shorten the impounding time set forth in the preceding
paragraph.

Article 59 Other property mentioned in Articles
38 and 40 of the Law on the Administration of Tax Collection
include immovables and movables such as real estate, cash and
marketable securities.

Motor vehicles, gold and silver ornaments, curios calligraphies
and paintings, luxurious residential buildings or houses other than
the one necessary for living do not fall into the scope of articles
and dwelling houses necessary to support the individual and its
dependent family members as mentioned in Articles 38, 40 and 42 of
the Law on the Administration of Tax Collection.

Tax authorities shall not adopt tax preservative measures and
compulsory enforcement measures on other household goods with the
unit price below 5,000 yuan.

 Article 60 Family members supported by a
taxpayer as stated in Articles 38, 40 and 42 of the Tax
Administration and Collection Law shall refer to the taxpayer’s
living-together spouse, lineal relatives and other relatives
without living sources and supported by the taxpayer.

Article 61 The guaranty mentioned in Articles
38 and 88 of the Law on the Administration of Tax Collection
includes the suretyship for tax payment provided for a taxpayer by
a surety approved by tax authorities, and the guaranty provided
with the taxpayer’s or a third party’s property which has not been
provided or entirely provided as guaranty.

The tax payment surety refers to any natural person, legal
person or other economic entity within the Chinese territory that
is able to provide guaranty for tax payment.

Any unit or individual without guaranty qualifications
prescribed by laws or administrative rules or regulations is not
allowed to serve as a tax payment guarantor.

Article 62 A tax
payment guarantor who is willing to provide guaranty for a taxpayer
shall fill in a letter of guaranty for tax payment stating clearly
the target, scope, duration and liabilities of guaranty and other
relevant issues. A letter of guaranty shall be deemed to be valid
only after it is signed and stamped by the taxpayer and the tax
payment guarantor and approved by tax
authorities.

In case a taxpayer or a third party provides a guaranty for tax
payment with its property, a detailed list of property shall be
filled in, indicating the value of the property and other relevant
issues. The detailed list of property provided as guaranty for tax
payment shall be valid only after it is signed and stamped by the
taxpayer or the third party and confirmed by tax authorities.

Article 63 When impounding or sealing up
commodities, goods or other property, tax authorities shall have
two or more officials present on the site and notify the person
subject to enforcement. In case the person subject to enforcement
is a natural person, he or an adult member of his family shall be
notified to be present; in case the person subject to enforcement
is a legal person or other organization, its legal representative
or principal responsible officer shall be notified to be present.
Any refusal of presence shall not affect the enforcement.

Article 64 When impounding or sealing up
commodities, goods or other property with an equivalent value to
the amount of tax payable, in accordance with the provisions of
Article 37, 38 or 40 of the Law on the Administration of Tax
Collection, tax authorities shall estimate the value with reference
to the market price, ex-factory price or evaluated price of the
like commodities.

Tax authorities, when defining the value of the commodities,
goods or other property according to the preceding paragraph, shall
have the surcharge on tax in arrears and expenses for impounding,
sealing up, keeping, auctioning and selling off them included.

Article 65 Tax authorities may impound, seal up
or auction as a whole the inseparable commodities, goods or other
property with a value exceeding the amount of tax payable in case
the taxpayer, tax withholding agent or tax payment guarantor has no
other property available for compulsory enforcement, and use the
proceeds from the auction to offset the tax, surcharge on tax in
arrears, penalties and expenses of impounding, sealing up, keeping
and auction and so on.

Article 66 In
impounding or sealing up the movables or immovables with a property
right certificate in line with the provisions of Article 37, 38 or
40 of the Law on the Administration of Tax Collection, tax
authorities may order the party involved to turn in the certificate
for safekeeping and at the same time issue a notice of assistance
for enforcement to the relevant department, which shall not handle
ownership transfer formalities of the movables or immovables in the
course of its being impounded or sealed up.

Article 67 Tax authorities may instruct the
person subject to enforcement to take care of the sealed-up
commodities, goods or other property, and the safekeeping
responsibility shall be borne by the person subject to
enforcement.

In case the continuous use of the sealed-up property does not
cause reduction of its value, tax authorities may allow the person
subject to enforcement to continuously use it; the person subject
to enforcement shall bear any loss to the property resulting from
its fault in the course of safekeeping or use.

Article 68 In case the
taxpayer settles the tax payment within the deadline set by tax
authorities after the tax preservative measures are adopted by tax
authorities, tax authorities shall terminate the tax preservative
measures within one day after receiving the tax payment or tax
payment receipt from the bank.

Article 69 In case of
settling tax payment with impounded or sealed-up commodities, goods
or other property, tax authorities shall entrust the auction to the
auction agencies lawfully set up; in case there is no way for
entrusted auction or it is not appropriate for auction, the local
commercial enterprises may be commissioned to sell them or the
taxpayer may be ordered to dispose of them within a specified time
limit; in case there is no way to commission local commercial
enterprises for sale and it is beyond the taxpayer’s ability to
dispose, tax authorities may conduct sales upon appraisal by
themselves. The specific measures for such sales upon appraisal
shall be formulated by the State Administration of Taxation.
Commodities prohibited by the State from free purchases or sales
shall be purchased by the relevant organization at the price set by
the State.

The remaining part of the income from auction or sales after
deducting the tax payable, surcharge on tax in arrears, penalties
and expenses for the impounding, sealing up, keeping, auction,
sales and so on shall be returned to the taxpayer within three
days.

Article 70 The loss as mentioned in Articles 39
and 43 of the Law on the Administration of Tax Collection refers to
the direct loss incurred to the legitimate rights and interests of
the taxpayer, tax withholding agent or tax payment guarantor as a
result of liability of tax authorities.

Article 71 Other financial institutions as
mentioned in the Law on the Administration of Tax Collection refer
to trust and investment companies, credit cooperatives, post
savings offices and other financial institutions approved by the
People’s Bank of China, the China Securities Regulatory Commission
or other authorities.

Article 72 Deposit as mentioned in the Law on
the Administration of Tax Collection includes savings deposits by
investors of individual proprietorship enterprises, partners of
partnership enterprises and individual businesses, funds in the
shareholder’s capital account, etc.

Article 73 In case the
taxpayer engaged in production or business operation or the tax
withholding agent fails to pay or remit tax within the prescribed
time limit, or the tax payment guarantor fails to pay the tax
guaranteed within the prescribed time limit, tax authorities shall
issue a notice of tax settlement ordering the payment or remission
of tax within a time limit not exceeding 15
days.

Article 74 In case the
taxpayer or its legal representative fails to settle the tax
payment due or surcharge on tax in arrears, or provide guaranty for
tax payment as required before leaving the territory of the
People’s Republic of China, tax authorities may notify the
administrative department of exit and entry to prevent its exit.
The specific measures for preventing exit shall be formulated by
the State Administration of Taxation jointly with the Ministry of
Public Security.

Article 75 The time period for imposing
surcharge on tax in arrears as prescribed in Article 32 of the Law
on the Administration of Tax Collection starts with the second day
from the expiration date for tax payment specified by laws or
administrative rules or regulations, or determined by tax
authorities pursuant to provisions of laws or administrative rules
or regulations, and ends with the day on which the taxpayer or tax
withholding agent actually pays or remits the tax.

Article 76 Tax authorities at or above the
county level shall regularly make proclamations concerning the
overdue tax unpaid by taxpayers at the site of tax collection or
through media such as radio, television, newspapers, periodicals or
computer network, etc.

Specific measures for such regular proclamation shall be
formulated by the State Administration of Taxation.

Article 77 The relatively large amount of
overdue tax mentioned in Article 49 of the Law on the
Administration of Tax Collection refers to an amount of overdue tax
of not less than 50,000 yuan.

Article 78 Tax authorities shall refund the
overpaid tax to the taxpayer within ten days from the date of their
discovery, or verify and refund the overpaid tax within 30 days
from the date of receiving the taxpayer’s application for refund in
case of the taxpayer’s discovery.

The tax refund with interest at the deposit interest rate of the
corresponding period of the bank as prescribed in Article 51 of the
Law on the Administration of Tax Collection does not include the
refund at final tax settlement upon the tax prepaid according to
law, or for exportation or tax reductions and exemptions.

Interest of the tax refund shall be calculated at the current
deposit interest rate set by the People’s Bank of China on the day
when tax authorities undertake the procedure for tax refund.

Article 79 In case the
taxpayer has both refundable tax and overdue tax, tax authorities
may use the refundable tax and the interest thereon to offset the
overdue tax and refund the remainder, if any, to the
taxpayer.

Article 80 The liability of tax authorities as
mentioned in Article 52 of the Law on the Administration of Tax
Collection refers to the improper application of tax laws or
administrative rules or regulations or illegal activity in law
enforcement by tax authorities.

Article 81 The miscalculation or other errors
by the taxpayer or tax withholding agent as mentioned in Article 52
of the Law on the Administration of Tax Collection refers to the
unintentional misapplication of calculation formula or apparent
clerical errors.

Article 82 The special circumstances mentioned
in Article 52 of the Law on the Administration of Tax Collection
refer to the cases where the due tax unpaid or underpaid, not
withheld or less withheld, not collected or less collected
accumulates to an amount of not less than 100,000 yuan on account
of the miscalculation or other errors by the taxpayer or tax
withholding agent.

Article 83 The time limit for making up the
shortage in tax payment or pursuing tax payment or surcharge on tax
in arrears as prescribed in Article 52 of the Law on the
Administration of Tax Collection starts from the day when the
taxpayer or tax withholding agent fails to pay the due tax or
underpays tax, or fails to remit the due tax or remits less
tax.

Article 84 In case the
auditing or fiscal authorities make any decision, in undertaking
the audit or examination according to law, on any violation of tax
law by tax authorities, tax authorities shall follow such
decisions. In case the auditing or fiscal authorities discover any
violation of tax law by the unit under audit or examination, they
shall issue a letter of decision or opinion instructing the unit to
pay tax or surcharge on tax in arrears that should be paid to tax
authorities. Tax authorities shall, according to the letter of
decision or opinion by relevant authorities and the provisions of
tax laws or administrative rules or regulations, collect the tax or
surcharge on tax in arrears according to the scope of tax
administration and remit it to the state treasury according to the
budget levels as prescribed by the State.

Tax authorities shall, within 30 days from the date of receiving
the letter of decision or opinion, give a written reply concerning
the implementation to the auditing or fiscal authorities.

The relevant authorities shall not at their own discretion
collect or remit to the state treasury, or dispose or occupy in any
other name any tax or surcharge on tax in arrears discovered in the
process of their duty execution.

Chapter VI Tax Inspection

Article 85 Tax authorities shall establish a
scientific inspection system, make overall plans and arrangements
for tax inspections, and impose strict controls on the frequency of
tax inspections to taxpayers or withholding agents.

Tax authorities shall work out a reasonable guideline for tax
inspections, in which the functions and duties of officials
respectively in charge of case selection, inspection, hearing or
execution shall be clearly defined and separated for mutual check
in order to standardize the case selection procedures and tax
inspection.

Specific measures for tax inspections shall be formulated by the
State Administration of Taxation.

Article 86 Tax authorities may exercise their
duties and powers set forth in Item 1 of Article 54 of the Law on
the Administration of Tax Collection at the business site of the
taxpayer or withholding agent. If necessary, tax authorities may,
upon approval of the commissioner of the tax bureau (sub-bureau
thereof) or office at or above the county level, take back for
inspection the taxpayer’s or withholding agent’s accounting books,
accounting vouchers, financial statements and other relevant
materials of previous accounting years. Tax authorities shall,
however, provide the taxpayer or withholding agent with a list of
the documents taken back and return them sound and complete within
three months. In case of special circumstances, tax authorities
may, upon approval of the commissioner of the tax bureau or office
at or above the city with districts or autonomous prefecture level,
take back for inspection the taxpayer’s or withholding agent’s
accounting books, accounting vouchers, financial statements and
other relevant materials of the current accounting year, but shall
return them within 30 days.

Article 87 Tax authorities shall, when
exercising their duties and powers set forth in Item 6 of Article
54 of the Law on the Administration of Tax Collection, designate
specific persons for the responsibility, carry out the inspection
on the strength of the nationally unified permit for deposit
account inspection, and shall have the obligation of keeping
confidential the information about the person under inspection.

The permit for deposit account inspection shall be formulated by
the State Administration of Taxation.

Items to be inspected by tax authorities include balance of the
taxpayer’s deposit account and capital flow.

Article 88 In
accordance with the provisions of Article 55 of the Law on the
Administration of Tax Collection, the duration of tax preservative
measures adopted by tax authorities shall not exceed six months
normally. In case an extension is necessary for serious cases, it
shall be reported to the State Administration of Taxation for
approval.

Article 89 Tax authorities and tax officials
shall exercise their duties and powers for tax inspection in
accordance with the provisions of the Law on the Administration of
Tax Collection and these Rules.

Tax officials shall present the tax inspection identity card and
notice of tax inspection when conducting tax inspections.
Taxpayers, withholding agents or other persons involved have the
right to reject inspection in case tax officials intend to conduct
tax inspection without such card and notice. In case of tax
inspection to markets and fairs and concentrated businesses, tax
authorities may use the unified notice of tax inspection.

The State Administration of Taxation shall determine the format
of the tax inspection identity card and the notice of tax
inspection and formulate the specific measures for the use and
administration of them.

Chapter VII Legal Liabilities

Article 90 Where a taxpayer fails to go through
the formalities for inspection or replacement of the tax
registration certificate according to the provisions, the tax
authorities shall order the taxpayer to make corrections within a
time limit, and may impose a penalty of not more than 2,000 yuan;
where the circumstances are serious, a penalty of not less than
2,000 yuan but not more than 10,000 yuan shall be imposed.

Article 91 Where anyone illegally prints,
lends, resells, alters or forges tax payment vouchers, the tax
authorities shall order it to make corrections and impose a penalty
of not less than 2,000 yuan but not more than 10,000 yuan, or,
where the circumstances are serious, not less than 10,000 yuan but
not more than 50,000 yuan. In case a crime is constituted, criminal
liability shall be investigated.

Article 92 Where banks or other financial
institutions fail to record the number of the tax registration
certificate in the bank accounts of the taxpayer engaged in
production or business operation, or fail to record the bank
account numbers in the tax registration certificate of the taxpayer
engaged in production or business operation in accordance with the
provisions of the Law on the Administration of Tax Collection, the
tax authorities shall order them to make corrections within a time
limit and impose a penalty of not less than 2,000 yuan but not more
than 20,000 yuan, or, where the circumstances are serious, not less
than 20,000 yuan but not more than 50,000 yuan.

Article 93 Where anyone illegally provides bank
accounts, invoices, certificates or other convenience to taxpayers
or tax withholding agents with a result of non-payment or
underpayment of tax or fraudulently obtaining tax refund for
exportation, the tax authorities may, apart from confiscating the
illegal income, impose a penalty of not more than one time the
amount of tax unpaid or underpaid, or of tax refund fraudulently
obtained.

Article 94 Where a taxpayer refuses to have its
tax withheld or collected by the tax withholding agent, the tax
withholding agent shall report to the tax authorities, which shall
be responsible for collecting the tax payable and surcharge on tax
in arrears directly from the taxpayer. In case the taxpayer rejects
such payment, the provisions of Article 68 of the Law on the
Administration of Tax Collection shall apply.

Article 95 Where tax authorities inspect
taxpayers at stations, docks, airports, postal enterprises or
branches thereof in accordance with the provisions of Item 5 of
Article 54 of the Law on the Administration of Tax Collection, if
such inspection is rejected by relevant units, the tax authorities
shall order them to make corrections, and may impose a penalty of
not more than 10,000 yuan; where the circumstances are serious, a
penalty of not less than 10,000 yuan but not more than 50,000 yuan
shall be imposed.

Article 96 A taxpayer
or tax withholding agent shall be punished according to the
provisions of Article 70 of the Law on the Administration of Tax
Collection, where it falls into one of the following
circumstances:

(1) providing false information, not reporting according to
facts, or refusing to provide relevant information;

(2) rejecting or preventing tax authorities from taking notes,
tape-recording, video-recording, photographing or copying the
situations or materials related to the case under
investigation;

(3) transferring, concealing or destroying the relevant
information by the taxpayer or tax withholding agent during the
period of inspection; or

(4) other circumstances of not accepting tax inspection
according to law.

Article 97 Where tax officials divide privately
the impounded or sealed-up commodities, goods or other property,
and the circumstances are so serious as to constitute a crime, they
shall be investigated for criminal liability according to law. If
the circumstances are not serious enough to constitute a crime,
administrative penalties shall be imposed upon them according to
law.

Article 98 Where a tax withholding agent
violates tax laws or administrative rules or regulations, which
results in a non-payment or underpayment of tax by the taxpayer,
the taxpayer shall pay or make up the shortage in payment of tax or
surcharge on tax in arrears and a penalty of not less than 50
percent but not more than 3 times of the amount unpaid or underpaid
by the taxpayer shall be imposed upon the tax withholding
agent.

Article 99 Tax authorities shall issue receipts
when imposing a penalty upon or confiscating the illegal income of
the taxpayer, tax withholding agent or other persons involved.
Otherwise, the taxpayer, tax withholding agent or other persons
involved shall have the right to refuse.

Article 100 The dispute over tax payment as
mentioned in Article 88 of the Law on the Administration of Tax
Collection refers to the dispute arising from the taxpayer, tax
withholding agent or tax payment guarantor over such specific
administrative acts by tax authorities as determining the subject
of tax payment, target of tax collection, scope of tax collection,
tax reduction and exemption, tax refund, applicable tax rate, base
of tax assessment, stages of tax payment, period and place of tax
payment, means of tax levying, etc.

Chapter VIII Service of Documents

Article 101 Tax authorities shall serve
taxation documents directly on recipients.

Where the recipient is a citizen, the document shall be
delivered to his own reception against his signature. Where the
recipient is absent, the document shall be delivered against
signature to the reception of his adult family member living
together.

Where the recipient is a legal person or an other organization,
the document shall be delivered against signature to the reception
of the legal representative of the legal person, the principal
responsible person of the organization, or the responsible person
of finance or the person specifically responsible for reception of
documents or letters of the legal person or the organization. In
case the recipient has an agent, the document may be delivered to
the agent’s reception against signature.

Article 102 There shall be a return of service
for the taxation documents served. The return of service shall bear
the date of reception and the signature or stamp by the recipient
or other persons as specified in these Rules for reception against
signature, upon which service shall be deemed completed.

Article 103 Where the recipient or any of the
other persons as specified in these Rules for reception against
signature refuses to sign for reception of the taxation document,
the person who delivers the document shall, on the return of
service, specify the reason for refusal and state the date, affix
the signature or stamp of himself and the witness to the return of
service, and leave the taxation document with the recipient, upon
which service shall be deemed completed.

Article 104 Where there is difficulty in a
direct service of taxation documents, tax authorities may entrust
other relevant authorities or units with the service, or send them
by mail.

Article 105 Where taxation documents are served
directly or through entrustment, the date of service shall be the
date when the recipient or witness signs or specifies for reception
on the return of service. In case the documents are served by mail,
the date of service shall be the date of reception specified on the
receipt of the registered mail, with the service being deemed
completed.

Article 106 Tax authorities may serve taxation
documents by a public notice under any of the following
circumstances and the service shall be deemed completed after 30
days of the public notice:

(1) the document is to be served on numerous recipients; or

(2) the document cannot be served through other means of service
specified in this chapter.

Article 107 The format of taxation documents
shall be determined by the State Administration of Taxation. The
taxation documents mentioned in these Rules include:

(1) letter of notification of taxation issues;

(2) letter of notification of rectification within a prescribed
time limit;

(3) letter of decision for tax preservative measures;

(4) letter of decision for compulsory taxation enforcement;

(5) letter of notification of tax inspection;

(6) letter of decision for tax disposition;

(7) letter of decision of tax administrative penalty;

(8) letter of decision of administrative reconsideration;
and

(9) other taxation documents.

Chapter IX Supplementary Provisions

Article 108 The terms “not less than”, “not
more than”, “within …days” and “expires” as mentioned in the Law on
the Administration of Tax Collection and these Rules shall all
include the given figure.

Article 109 In case
the last day of the prescribed time limit set forth in the Law on
the Administration of Tax Collection and these Rules is an official
holiday, the day following the end of the holiday period shall be
deemed as the last day of the time limit. In case not less than
three consecutive days in the prescribed time limit are official
holidays, the prescribed time limit shall be extended by the number
of holidays.

Article 110 The commissions for withholding or
entrusted collection of tax as prescribed in Paragraph 3 of Article
30 of the Law on the Administration of Tax Collection shall be
included in the budget and paid by tax authorities to the
withholding agent in accordance with the provisions of laws and
administrative rules or regulations.

Article 111 The measures for taxpayers or tax
withholding agents to entrust tax agents with taxation matters
shall be formulated by the State Administration of Taxation.

Article 112 The collection and administration
of Cultivated Land Occupation Tax, Deed Tax, Agriculture Tax and
Animal Husbandry Tax shall be subject to the relevant provisions of
the State Council.

Article 113 These Rules shall be effective as
of October 15, 2002. The Rules for the Implementation of the Law of
the People’s Republic of China on the Administration of Tax
Collection promulgated by the State Council on August 4, 1993 shall
be repealed simultaneously.

(State Council)