Interim Regulations of the People's Republic of China on Vessel Tonnage Tax

Order of the State Council No. 610

December 5, 2011

The Interim Regulations of the People's Republic of China on Vessel Tonnage Tax were adopted at the 182th executive meeting of the State Council on November 23, 2011, and are hereby issued for implementation as of January 1, 2012.

Premier: Wen Jiabao

Interim Regulations of the People's Republic of China on Vessel Tonnage Tax

Article 1 Any vessel entering a domestic port of the People's Republic of China from an oversea port ((hereafter referred to as "Taxable Vessel") shall be subject to vessel tonnage tax (hereinafter referred to as "Tonnage Tax") in accordance with these Regulations.

Article 2 The taxable items and rates of Tonnage Tax shall be subject to the Table of Taxable Items and Rates of Tonnage Tax attached hereto (the "Table").
Any adjustment of the Table shall be subject to the decision of the State Council.

Article 3 The rates of Tonnage Tax are classified into preferential rates and general rates.
The preferential rates of Tonnage Tax shall apply to Taxable Vessels of the nationality of the People's Republic of China or of the nationality of any other country that has entered into an agreement or treaty with the People's Republic of China with a mutually-offered most-favored-nation treatment provision on vessel taxes.
The general rates of Tonnage Tax shall apply to any other Taxable Vessels.

Article 4 Tonnage Tax shall be collected on the basis of net tonnage and the validity term of Tonnage Tax Certificate.
When making a tax declaration each time, the responsible person for a Taxable Vessel may apply for, and be issued, a Tonnage Tax Certificate with a certain validity term on the basis of the Table.

Article 5 The taxable amount of Tonnage Tax shall be the product of net tonnage being multiplied by the applicable tax rate.

Article 6 Tonnage Tax shall be collected by the customs authorities (hereinafter referred to collectively as "Customs Authority" ). Customs Authority shall issue payment receipts for Tonnage Tax.
Customs Authority shall issue a tonnage tax certificate (hereinafter referred to as "Tonnage Tax Certificate" ) to a Taxable Vessel with a validity term as applied by the responsible person for the vessel upon payment of Tonnage Tax or provision of a security for the payment by such person.

Article 7 When being processed for entry into the territory at a port of entry, a Taxable Vessel shall make a tax declaration to Customs Authority and apply for Tonnage Tax Certificate or produce its existing Tonnage Tax Certificate to be verified. When being processed for exit the territory at a port of exit, a Taxable Vessel shall produce its Tonnage Tax Certificate to be verified.
To apply for Tonnage Tax Certificate, the responsible person for a Taxable Vessel shall submit to Customs Authority the following documentations:
1. The nationality certificate of the Taxable Vessel, or the certification for the retaining of such certificate issued by a competent maritime authority; and
2. The tonnage certificate of the Taxable Vessel.

Article 8 The obligation of a Taxable Vessel to pay Tonnage Tax arises on the date of its entry into the territory at a port of entry
Where a Taxable Vessel is not to exit after the expiration of its Tonnage Tax Certificate, the responsible person for the Taxable Vessel shall apply for a new Tonnage Tax Certificate and pay Tonnage Tax from the date immediately following the date of expiration of the previous certificate.

Article 9 The following vessels shall be exempted from Tonnage Tax:
1. Vessels on which the taxable amount of Tonnage Tax is below CNY 50;
2. Unloaded vessels of which the ownership is obtained abroad by means of purchase, receipt of donation or inheritance and which enters the territory for the first time;
3. Vessels that do not load or unload goods and passengers within the 24 hours from the expiration of their Tonnage Tax Certificates;
4. Unpowered vessels (excluding unpowered barges);
5. Fishery vessels for fishing or aquaculture;
6. Vessels taking refuge, under anti-epidemic quarantine or repair, having ceased business operations or being dismantled that do not load or unload goods and passengers;
7. Vessels owned or requisitioned by armed forces or armed police;
8. Vessels used by foreign embassies or consulates in China, representative offices of international organizations in China and employees thereof which shall be exempted from Tonnage Tax under the relevant laws; and
9. Other vessels specified by the State Council.

Article 10 For a Taxable Vessel under any of the following circumstances during the term of its Tonnage Tax Certificate, Customs Authority shall approve the extension of the term of its Tonnage Tax Certificate by the actual duration of the circumstance:
1. The Taxable Vessel is taking refuge or under anti-epidemic quarantine or under repair or renovation which do not load or unload goods and passengers; or
2. The Taxable Vessel is requisitioned by armed forces or armed police.
Where a Taxable Vessel anchors in a non-customs location due to force majeure, the responsible person for the Taxable Vessel shall immediately report to nearby Customs Authority, and make a tax declaration to Customs Authority in accordance with these Regulations upon the removal of the force majeure event.

Article 11 A vessel meeting any of the requirements stated in Items 5 to 8 of Article 9 or Article 10 of this Law shall apply for tax exemption or extension of its Tonnage Tax Certificate by stating its basis and reason for such application and providing legally valid documentation of proof or owner-user relationship certificate issued by the relevant authorities or organizations such as the maritime, fishery vessel administration, or health and quarantine authorities.

Article 12 The responsible person for a Taxable Vessel shall pay Tonnage Tax to a designated bank within 15 days upon the issuance of a Tonnage Tax payment receipt for the vessel by Customs Authority. In the event of late payment of the Tonnage Tax, an overdue fine shall be charged at the rate of 0.5‰ of the overdue and unpaid amount for each overdue day.

Article 13 For a Taxable Vessel to make a tax declaration and complete the entry-exit procedures before arriving at a port of entry as approved by Customs Authority, the responsible person for the vessel shall provide Customs Authority with a security commensurate with its legal obligation to make the Tonnage Tax payment, and shall declare and pay the Tonnage Tax to Customs Authority in accordance with these Regulations upon arrival at the port of entry.
The following properties and rights may be used as security:
1. RMB and other convertible currencies;
2. Drafts, promissory notes, cheques, bonds, and deposit receipt;
3. Letters of guarantee issued by banks or nonbanking financial institutions and
4. Other properties and rights legally recognized by Customs Authority.

Article 14 Where the net tonnage of a Taxable Vessel changes during the term of its Tonnage Tax Certificate due to repair, the Tonnage Tax Certificate shall remain valid, and the responsible person for the vessel shall provide documentation proving the repair of the vessel when the vessel is being processed for exit or entry.

Article 15 Where the taxable items or tax rates applicable to a Taxable Vessel changes during the term of its Tonnage Tax Certificate due to the adjustment of taxable items or rates or the change of the nationality of the vessel, the Tonnage Tax Certificate shall remain valid.
In the event of a change in tax rate due to a change of nationality, the responsible person for the Taxable Vessel shall provide documentation proving the change of nationality of the vessel when the vessel is being processed for entry or exit.

Article 16 For a Tonnage Tax Certificate that is destroyed or lost before it expires, a written application shall be made to the issuing Customs Authority of the original certificate for issuing a duplicate of the original Tonnage Tax Certificate, with no additional payment of Tonnage Tax required.

Article 17 Where Customs Authority discovers that it has taxed short of what is required or has omitted to tax a Taxable Vessel, it shall recover the amount of shortage or original amount payable from the Taxable Vessel within one year from the date when such amount was originally due to be paid, but if such shortage or omission is caused by any illegality on the part of the Taxable Vessel, Customs Authority may recover the amount of shortage or original amount payable from the vessel within three years from the date when such amount was originally due to be paid, and additionally charge the vessel for an overdue fine at a rate of 0.5‰ of the amount of shortage or original amount payable for each overdue date from the original due date.
Where an overpayment of tax on a Taxable Vessel is discovered by the Customs Authority, it shall notify the vessel for the processing of tax refund along with interest calculated by the interest rate on demand deposits of the corresponding period.
Where the discovery of an overpayment of tax is made on the part of a Taxable Vessel, a written request may be made, within one year from the date when the original payment was made, to Customs Authority for refunding the overpaid amount along with interest calculated by the interest rate on demand deposits of the corresponding period; and Customs Authority shall verify the case and notify the vessel for the processing of tax refund within 30 days from the date of accepting the request.
A Taxable Vessel that is notified under the second or third paragraph of this Article shall go through the relevant tax refund procedures within three months from the date of notification.

Article 18 For any of the following acts by a Taxable Vessel, Customs Authority shall order it to make correction within a time limit and impose a fine of CNY2000 up to CNY30,000 on it; for any failure to pay or underpayment of Tonnage Tax, a Taxable Vessel shall be subject to a fine which is not less than 50% of, but not more than five times the tax amount due or underpaid, or CNY2,000 if such amount is below CNY2,000:
1. The Taxable Vessel fails to declare Tonnage Tax or apply for a Tonnage Tax Certificate in accordance with relevant provisions; or
2. The Taxable Vessel fails to submit its Tonnage Tax Certificate for verification or any other certificates in accordance with relevant provisions.

Article 19 Tonnage Tax, overdue fines, and fines shall be computed in RMB.

Article 20 The following terms as used in these Regulations shall be defined as follows:
Net tonnage refers to the net tonnage as stated on the vessel tonnage certificate issued by the government of the country or region of nationality of a Taxable Vessel;
Unpowered vessels refer to vessels without any kind of motor but propelled passively by external force drives;
Unpowered barges refer to unpowered vessels that have been registered as barges with the fishery vessel administration authorities;
Fishery vessels for fishing or aquaculture refer to vessels that have been registered as fishing vessels or aquaculture vessels with the fishery vessel administration authorities of the People's Republic of China;
Tugboats refer to special-operation vessels specially used for pushing or tugging transportation vessels. In the case of a tugboat, each kilowatt of motor power shall be equal to 0.67 net ton.
Term of the Tonnage Tax Certificate refers to the period of time computed on the basis of the calendar year and day.

Article 21 These Regulations shall come into force as of January 1, 2012 and the Interim Measures of the Customs of the People's Republic of China Concerning Vessel Tonnage Dues approved by the Financial and Economic Committee under the State Council on September 16, 1952 and promulgated by the General Administration of Customs on September 29, 1952 shall be abolished as of the same time.

Appendix: Table of Taxable Items and Rates of Tonnage Tax