Income Tax Law of the People's Republic of China for Enterprises with

Foreign Investments and Foreign Enterprises (1)

1991.07.01 

NATIONAL PEOPLE'S CONGRESS INCOME TAX LAW OF TH PEOPLE'S　 REPUBLIC　 OF　CHINA　FOR ENTERPRISES WITH FOREIGN INVESTMENTS AND FOREIGN ENTERPRISES (Adopted on April　9, 1991 at the fourth Session of Seven National People's Congress) 　

Article　 1.　 Income　 tax　shall be paid in accordance with the provisions　of　 this Law by enterprises with foreign investments within the　territory　of　the　 People's　Republic　of　China　on their income derived from production, business operations and other sources. 　Income　 tax　shall　be paid in accordance with the provisions of this Law　 by　 foreign　　enterprises　 on　 their　 income　 derived　 from production,　 business　 operations　　and　 other　sources　within　the territory of the People's Republic of China. 　     

Article　 2.　"Enterprises　with foreign investments" referred to in　this　Law　　means　　Chinese-foreign　　equity　　joint　 ventures. Chinese-foreign　contractual　　joint　 ventures　 and　foreign　capital enterprises　that　are established in China. 　"Foreign　 enterprises"　 referred　 to　 in　 this　Law means foreign companies,　enterprises　 and　other　economic　organizations which have organizations　or　establishments　 in　China　and　engage in production or　business　operations, and　which,　though　without　organizations or establishments in China, have income sources within China. 　

Article　 3.　 Any　 enterprise　 with　foreign investments which establishes　its　 head　 office　in　China　shall pay its income tax on its　income　derived from　sources inside and outside China. Any foreign enterprise　shall　pay its income tax on its income derived from sources within China. 　

Article　 4.　The　taxable　income　of an enterprise with foreign investments　and　 an　 organization　 or　 establishment　 set　 up　in China　 to　 engage　 in　production　 or　 business　 operations　by　a foreign　enterprise,　shall　be　the amount　remaining　from　its　gross income　 in　 a　tax year after the costs, expenses and losses have been deducted. 　

Article　 5.　 The　 income　tax　on　enterprises　with　foreign investments　and　the　 income　 tax　which　shall　be　paid　by foreign enterprises　on　the　income of their　organizations　or　establishments set　 up　in　China　to　engage　in production　or　business　operations shall　be　computed　on　the　taxable　income　at　the　rate　of　thirty percent;　local　income　tax　shall be computed on the taxable income at the rate of three percent. 　

 Article　 6.　The　state shall, in accordance with the industrial policies,　guide　　the　 orientation　 of　 foreign　 investments　 and encourage　 the　establishment　of　enterprises with foreign investments which　adopt advanced technology and equipment and export all or greater part of their products. 　

Article　 7.　 The income tax on　enterprises　with foreign investments　 established in Special Economic Zones, foreign enterprises　 which have organizations or　establishments,　in　Special Economic　 Zones　 engaged　in　production or　 business operations, and　 an　 enterprise　 with　 foreign investments of a  production nature in Economic and　 Technological Development Zones, shall be levied at the reduced rate of fifteen percent.  

The income　 tax　on　enterprises　with foreign investments in other regions　defined　 by the State Council, within the scope of energy, transportation,　harbor,　 wharf　 or　other projects encouraged by the state,　may　be　levied　at　the　 reduced　rate of fifteen percent. The specific rules shall be regulated by the State Council. 　

The income tax  on　 enterprises　 with　foreign investments of a production　nature　 established　in　coastal　economic　open　zones　or in　the　old　urban　districts　 of　cities　where　the Special Economic Zones　or the Economic and Technological　Development Zones are located, shall be levied at the reduced rate of twenty four percent. 　

 Article　 8.　 Any　 enterprise　 with　foreign　investments of a production　nature　 scheduled　in operate for a period of not less than ten　years　shall,　upon　 examination　 and　verification　by　the　tax authorities　of　an　application　filed　by　the　enterprise,　from　the year　 beginning　 to　make profit, be exempted　from　income tax in the first　and　second years and allowed a fifty percent　reduction　in　the third　to　fifth　years.　However,　the income tax on enterprises　 with foreign　 investments　 engaged　 in　 the　 exploitation　 of resources such　 as petroleum, natural gas, rare metals, and precious metals shall be　 regulated　 separately　 by　the　State　Council.　Enterprises with foreign　 investments　which　have　actually　operated for a period less than　ten　years,　shall　repay　the　amount　of　income tax exempted or reduced already. 　

The　relevant regulations, promulgated by the State Council before the entry　into　 force　 of　this Law, which provide preferential treatment of　exemption　from　　or　 reduction　 of　income　tax　on　enterprises engaged　 in　 energy,　transportation,　 harbor,　 wharf　 and　 other major　projects　of　a production nature　for　a period longer than that specified　 in　 the　preceding　paragraph,　or　 provide　 preferential treatment　of exemption from or reduction of income tax　on　enterprises engaged　 in　major　projects　of　a non-production nature, shall remain applicable after this Law enters into force. 　

Any　 enterprise　 with　 foreign　 investments　which　is　engaged in agriculture,　 forestry　　 or　　animal　 husbandry　 and　 any　 other enterprise　 with　 foreign　investments　which　is　located　in　remote underdeveloped　　areas　 may,　 upon　 approval　　by　 the　 competent department　　for　 tax　 affairs　 under　the　State　Council　 of　 an application　filed　by　the　enterprise,　be allowed a fifteen to thirty percent　 reduction　of the amount of income tax payable for a period of another　ten　years　following　the　expiration　of　the　period for tax exemption or reduction as provided for in the preceding two paragraphs.