Interim Regulations of the People's Republic of China on Consumption Tax (Revised in 2008)

Order of the State Council No. 539

November 10,2008

The Interim Regulations of the People's Republic of China on Consumption Tax revised and adopted at the 34th executive meeting of the State Council on November 5, 2008 are hereby promulgated and shall come into effect as of January 1, 2009.

Premier Wen Jiabao

Interim Regulations of the People's Republic of China on Consumption Tax (Revised in 2008)

(Promulgated by the Order of the State Council No. 135 on December 13, 1993 and adopted after being revised at the 34th executive meeting of the State Council on November 5, 2008)

Article 1 Any institution and individual that produces subcontract the processing of or import the consumer goods specified in these Regulations and other institutions or individuals that are recognized by the State Council and sell the consumer goods specified in these Regulations shall be taxpayers of consumption tax and shall pay consumption tax in accordance with these Regulations.

Article 2 The taxable items and rates of consumption tax shall be subject to the Taxable Item and Tax Rate Form for Consumption Tax appended to these Regulations.
Adjustments made to the taxable items and rates of consumption tax shall be determined by the State Council.

Article 3 For taxpayers dealing in taxable consumer goods with different tax rates (hereinafter referred to as the"taxable consumer goods"), the sales amount and sales volumes of the taxable consumer goods shall be calculated respectively. In the event that the sales amount and sales volumes have not been calculated respectively or that the taxable consumer goods with different tax rates are combined into a whole set of consumer goods for sale, a higher tax rate shall apply.

Article 4 Taxpayers producing taxable consumer goods shall pay tax when selling the goods. Taxable consumer goods produced by taxpayers for their self-use in continuous production of taxable consumer goods shall not be taxed; such goods used for other purposes shall be taxed when delivered for use.
For taxable consumer goods entrusted for processing, the tax shall be withheld by the commissioned party upon delivery to the contractor unless the commissioned party is a natural person. Where taxable consumer goods entrusted for processing are used for continuous production of taxable consumer goods by commissioning party, the tax paid may be deducted in accordance with the relevant regulations.
Imported taxable consumer goods shall be subject to tax upon import declaration.

Article 5 The consumption tax shall be computed on the basis of the good's value, volume or the combination of the value and volume (hereinafter referred to as the"compound tax") in accordance with the following formulae:
Ad valorem tax payable = Sales amount * Pro rata rate
Specific tax payable = Sales volume * Flat rate
Compound tax payable = Sales amount * Pro rata rate Sales volume * Flat rate
The sales amount of consumer goods sold by taxpayers shall be calculated in CNY and those calculated in other currencies shall be converted into CNY.

Article 6 The term "sales amount" refers to the total consideration and other charges receivable from the buyer for the taxable consumer goods sold by the taxpayer.

Article 7 Self-produced taxable consumer goods for the taxpayer's own use shall be subject to tax in accordance with the selling price of the consumer goods of the same type produced by the taxpayers. Where the selling price of similar consumer goods is not available, the tax shall be assessed according to the composite assessable value.
The formula for computing the composite assessable value for ad valorem tax is as follows:

Composite assessable value = (Cost Profit) /(1- Pro rata rate)
The formula for computing the composite assessable value for compound tax is as follows:
Composite assessable value = (Cost Profit Self-produced and self-used amount * Flat rate )/(1-Pro rata rate)

Article 8 Taxable consumer goods subcontracted for processing shall be subject to tax in accordance with the selling price of the consumer goods of the same type produced by the subcontractors. Where the selling price of similar consumer goods is not available, the tax shall be assessed according to the composite assessable value.
The formula for computing the composite assessable value for ad valorem tax is as follows:

Composite assessable value = (Cost of materials Processing charges)/(1- Pro rata rate)
The formula for computing the composite assessable value for compound tax is as follows:
Composite assessable value = (Cost of materials Processing charges Subcontracted amount * Flat rate )/(1-Pro rata rate)

Article 9 Imported taxable consumer goods shall be subject to tax in accordance with the composite assessable value.
The formula for computing the composite assessable value for ad valorem tax is as follows:

Composite assessable value = (Dutible Value Customs Duty)/(1- Pro rata rate)
The formula for computing the composite assessable value for compound tax is as follows:
Composite assessable value = (Dutible Value Customs Duty Imported amount * Flat rate)/(1- Pro rata rate)

Article 10 Where the price for tax assessment of taxable consumer goods is obviously and unjustifiably low, the price shall be verified and determined by the competent tax authorities.

Article 11 Taxpayers exporting taxable consumer goods shall be exempt from the consumption tax, unless otherwise provided for by the State Council. The specific measures for tax exemption of exported taxable consumer goods will be formulated by the competent public finance and tax authorities under the State Council.

Article 12 Consumption tax shall be collected by the tax authorities. Consumption Tax on the import of taxable consumer goods shall be collected by customs on behalf of the tax authorities.
Consumption Tax on taxable consumer goods carried or mailed into China by individuals shall be levied together with Customs duty. The detailed measures shall be formulated by the Customs Tariff Committee of the State Council in conjoint with other relevant departments.

Article 13 Taxpayers selling taxable consumer goods or producing taxable consume goods for self-use shall file the tax return and pay tax to the competent tax authorities at the place where the taxpayers' institutions or residences are located, unless otherwise provided by the competent public finance and tax departments under the State Council.
As for taxable consumer goods sub-contracted for processing, the consumption tax shall be paid to the local competent tax authorities at the place where the sub-contractors are located.
For imported taxable consumer goods, the tax shall be reported and paid to the customs at the place where the imports are declared.

Article 14 The time limit for consumption tax payment shall be one day, three days, five days, ten days, fifteen days, one month or one quarter. The tax payment time limit for particular taxpayers shall be determined by the competent tax authorities in accordance with the tax payable of the taxpayers. Taxpayers that are unable to pay tax in a fixed period may pay on a transaction-by-transaction basis.
Taxpayers whose tax payment period is one month or one quarter shall file a tax return within fifteen days after the expiry of the period; taxpayers whose tax payment period is one day, three days, five days, ten days, or fifteen days shall pay advance tax within five days after the expiry of the period and file a tax return and pay off the tax payable of the month within the first fifteen days of the next month.

Article 15 Taxpayers importing taxable consumer goods shall pay tax within fifteen days after the completion and issuance of special tax payment certificates for import consumption tax by customs.

Article 16 The administration of consumption tax collection shall be subject to the Law of the People's Republic of China on the Administration of Tax Levying and the relevant provisions in these Regulations.

Article 17 These Regulations shall come into effect as of January 1, 2009.