Article 11
Losses incurred in a tax year by any enterprise with foreign
investment and by an establishment or a place set up in China by a foreign
enterprise to engage in production or business operations may be made up by the
income of the following tax year. Should the income of the following tax year be
insufficient to make up for the said losses, the balance may be made up by its
income of the further subsequent year, and so on, over a period not exceeding
five years.
Article 12
Any enterprise with foreign investment shall be allowed, when
filing a consolidated income tax return, to deduct from the amount of tax
payable the foreign income tax already paid abroad in respect of the income
derived from sources outside China. The deductible amount shall, however, not
exceed the amount of income tax otherwise payable under this Law in respect of
the income derived from sources outside China.
Article 13
The payment or receipt of charges or fees in business
transactions between an enterprise with foreign investment or an establishment
or a place set up in China by a foreign enterprise to engage in production or
business operations, and its associated enterprises, shall be made in the same
manner as the payment or receipt of charges or fees in business transactions
between independent enterprises. Where the payment or receipt of charges or fees
is not made in the same manner as in business transactions between independent
enterprises and results in a reduction of the taxable income, the tax
authorities shall have the right to make reasonable adjustment.
Article 14
Where an enterprise with foreign investment or an establishment
or a place set up in China by a foreign enterprise to engage in production or
business operations is established, moves to a new site, merges with another
enterprise, breaks up, winds up or makes a change in any of the main entries of
registration, it shall present the relevant documents to and go through tax
registration or a change or cancellation in registration with the local tax
authorities after the relevant event is registered, or a change or cancellation
in registration is made with the administrative agency for industry and
commerce.
Article 15
Income tax on enterprises and local income tax shall be
computed on an annual basis and paid in advance in quarterly instalments. Such
payments shall be made within fifteen days from the end of each quarter and the
final settlement shall be made within five months from the end of each tax year.
Any excess payment shall be refunded and any deficiency shall be repaid.
Article 16
Any enterprise with foreign investment and any establishment or
place set up in China by a foreign enterprise to engage in production or
business operations shall file its quarterly provisional income tax return in
respect of advance payments with the local tax authorities within the period for
each advance payment of tax, and it shall file an annual income tax return
together with the final accounting statements within four months from the end of
the tax year.
Article 17
Any enterprise with foreign investment and any establishment or
place set up in China by a foreign enterprise to engage in production or
business operations shall report its financial and accounting systems to the
local tax authorities for reference. All accounting records must be complete and
accurate, with legitimate vouchers as the basis for entries.
If the financial
and accounting bases adopted by an enterprise with foreign investment and an
establishment or a place set up in China by a foreign enterprise to engage in
production or business operations contradict the relevant regulations on tax of
the State Council, tax payment shall be computed in accordance with the relevant
regulations on tax of the State Council.
Article 18
When any enterprise with foreign investment goes into
liquidation, and if the balance of its net assets or the balance of its
remaining property after deduction of the enterprise's undistributed profit,
various funds and liquidation expenses exceeds the enterprise's paid in capital,
the excess portion shall be liquidation income on which income tax shall be paid
in accordance with the provisions of this Law.
Article 19
Any foreign enterprise which has no establishment or place in
China but derives profit, interest, rental, royalty and other income from
sources in China, or though it has an establishment or a place in China, the
said income is not effectively connected with such establishment or place, shall
pay an income tax of twenty percent on such income.
For the payment of income
tax in accordance with the provisions of the preceding paragraph, the income
beneficiary shall be the taxpayer and the payer shall be the withholding agent.
The tax shall be withheld from the amount of each payment by the payer. The
withholding agent shall, within five days, turn the amount of taxes withheld on
each payment over to the State Treasury and submit a withholding income tax
return to the local tax authorities.
Income tax shall be exempted or reduced
on the following income:
(1) the profit derived by a foreign investor from an
enterprise with foreign investment shall be exempted from income tax;
(2)
income from interest on loans made to the Chinese government or Chinese State
banks by international financial organizations shall be exempted from income
tax;
(3) income from interest on loans made at a preferential interest rate
to Chinese State banks by foreign banks shall be exempted from income tax;
and
(4) income tax of the royalty received for the supply of technical
know-how in scientific research, exploitation of energy resources, development
of the communications industries, agricultural, forestry and animal husbandry
production, and the development of important technologies may, upon approval by
the competent department for tax affairs under the State Council, be levied at
the reduced rate of ten percent. Where the technology supplied is advanced or
the terms are preferential, exemption from income tax may be allowed.
Apart
from the aforesaid provisions of this Article, if preferential treatment in
respect of reduction of or exemption from income tax on profit, interest,
rental, royalty and other income is required, it shall be regulated by the State
Council.
Article 20
The tax authorities shall have the right to inspect the
financial, accounting and tax affairs of enterprises with foreign investment and
establishments or places set up in China by foreign enterprises to engage in
production or business operations, and have the right to inspect tax withholding
of the withholding agent and its payment of the withheld tax into the State
Treasury.
The entities and the withholding agents being so inspected must
report the facts and provide relevant information. They may not refuse to report
or conceal any facts.
When making an inspection, the tax officials shall
produce their identity documents and be responsible for confidentiality.
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