Corporate Income Tax English versionThe Law of the People’s Republic of China on Enterprise Income Tax Table of Content Chapter One General Provisions Chapter Two Taxable Income Chapter Three Paya

. Article 3 The enterprise income tax shall be levied on the taxable income obtained by enterprises within China’s territory, including income from production and business operations, income from transfer of property, and other income. The enterprise income tax shall be levied on the taxable income obtained by non-resident enterprises within China’s territory, including income from production and business operations, income from transfer of property, and other income obtained within China’s territory. Article 4 The enterprise income tax shall be levied in accordance with the principle of territoriality. Enterprises’ income obtained outside China’s territory shall be exempted from enterprise income tax, except for those stipulated in this Law. Article 5 The tax authority shall perform its duties in accordance with the law, and shall protect the legitimate rights and interests of taxpayers in accordance with the law. Chapter Two Taxable Income Article 6 The taxable income of an enterprise shall be the balance of its total income less the non-taxable income and the deductible expenses. Article 7 The total income of an enterprise includes the following: (1) Income from production and business operations; (2) Income from transfer of property; (3) Other income. Article 8 The non-taxable income of an enterprise includes the following: (1) Interest income on national bonds; (2) Interest income on financial bonds issued by the government; (3) Capital gains from the transfer of national bonds and financial bonds issued by the government; (4) Dividend income from resident enterprises; (5) Other income specified by the State Council. Article 9 The deductible expenses of an enterprise include the following: (1) Cost of sales; (2) Expenses for administration, selling, and financial management; (3) Depreciation expenses; (4) Amortization expenses; (5) Taxes and fees; (6) Losses from bad debts; (7) Donations to public welfare; (8) Other expenses related to production and business operations. Article 10 The cost of sales of an enterprise includes the following: (1) Raw materials expenses; (2) Expenses for outsourcing processing; (3) Expenses for labor; (4) Depreciation expenses of fixed assets and intangible assets used for production and business operations; (5) Other expenses related to the cost of sales. Article 11 The expenses for administration, selling, and financial management of an enterprise include the following: (1) Management expenses; (2) Selling expenses; (3) Financial expenses; (4) Other expenses related to administration, selling, and financial management. Article 12 The depreciation expenses of an enterprise refer to the expenses for the depreciation of fixed assets used for production and business operations. Article 13 The amortization expenses of an enterprise refer to the expenses for the amortization of intangible assets used for production and business operations. Article 14 The taxes and fees of an enterprise include the following: (1) Enterprise income tax payable; (2) Value-added tax payable; (3) Consumption tax payable; (4) City maintenance and construction tax payable; (5) Education surtax payable; (6) Local education surtax payable; (7) Land appreciation tax payable; (8) Resource tax payable; (9) Other taxes and fees related to production and business operations. Article 15 The losses from bad debts of an enterprise refer to the losses caused by the failure of the debtor to pay back the loan or the accounts receivable for the sale of goods or services. Article 16 The donations to public welfare of an enterprise refer to the donations to charitable organizations or public welfare activities for the purpose of social welfare and public welfare in accordance with the law. Article 17 The actual expenses incurred by an enterprise in accordance with the law for research and development of science and technology shall be deducted from the taxable income. Chapter Three Payable Tax Article 18 The enterprise income tax shall be levied at a rate of 25%. For enterprises that are engaged in encouraged industries or projects, the enterprise income tax shall be levied at a reduced rate of 15%. For enterprises that are engaged in encouraged industries or projects in the western region of China, the enterprise income tax shall be levied at a reduced rate of 12.5%. Article 19 The tax authorities shall collect enterprise income tax on a quarterly basis. Article 20 The tax payable by an enterprise shall be calculated and paid on the basis of the annual taxable income. Enterprises that have already paid tax on a quarterly basis shall not be required to pay additional tax. Article 21 If an enterprise has made profits overseas and has paid foreign income tax, it may apply for a tax credit in accordance with the provisions of the relevant tax agreements or other relevant provisions of the State. Chapter Four Preferential Tax Treatment Article 22 Enterprises that are engaged in encouraged industries or projects shall enjoy the following preferential tax treatment in accordance with the relevant provisions of the State: (1) Exemption of enterprise income tax for the first two years from the year in which the enterprise makes a profit, and a 50% reduction of enterprise income tax for the next three years; (2) Exemption of enterprise income tax for the first three years from the year in which the enterprise makes a profit, and a 50% reduction of enterprise income tax for the next three years if the enterprise is engaged in encouraged industries or projects in the western region of China; (3) Exemption of enterprise income tax for the first five years from the year in which the enterprise makes a profit, and a 50% reduction of enterprise income tax for the next five years if the enterprise is engaged in encouraged industries or projects that are key to the national economy and people’s livelihood. Article 23 Enterprises that are engaged in small and low-profit businesses shall enjoy the following preferential tax treatment in accordance with the relevant provisions of the State: (1) A 50% reduction of enterprise income tax; (2) Exemption of enterprise income tax if the annual taxable income is less than RMB 30,000. Article 24 Enterprises that are engaged in agriculture, forestry, animal husbandry, and fishery shall enjoy the following preferential tax treatment in accordance with the relevant provisions of the State: (1) A 50% reduction of enterprise income tax; (2) Exemption of enterprise income tax if the annual taxable income is less than RMB 30,000. Article 25 Enterprises that invest in energy conservation, environmental protection, and water saving shall enjoy the following preferential tax treatment in accordance with the relevant provisions of the State: (1) A 10% reduction of enterprise income tax; (2) Exemption of enterprise income tax for the first year from the year in which the enterprise makes a profit, and a 50% reduction of enterprise income tax for the next two years. Chapter Five Tax Withheld at Source Article 26 The enterprises and individuals that pay salaries, wages, remunerations, and other income to taxpayers shall withhold and pay the enterprise income tax in accordance with the relevant provisions of the State. Article 27 The enterprises and individuals that pay interest, dividends, and bonuses to taxpayers shall withhold and pay the enterprise income tax in accordance with the relevant provisions of the State. Article 28 The enterprises and individuals that pay income from lease, transfer of property, and other income to taxpayers shall withhold and pay the enterprise income tax in accordance with the relevant provisions of the State. Chapter Six Special Tax Payment Adjustment Article 29 If an enterprise has paid an enterprise income tax that exceeds the amount payable in accordance with the provisions of this Law due to errors in calculation, the enterprise may apply for a tax refund or offset against the tax payable for the following year. If an enterprise has paid an enterprise income tax that is less than the amount payable in accordance with the provisions of this Law due to errors in calculation, the enterprise shall make up the tax payment. Article 30 If an enterprise has paid an enterprise income tax that exceeds the amount payable in accordance with the provisions of this Law due to the payment of tax on non-taxable income or the non-deduction of deductible expenses, the enterprise may apply for a tax refund or offset against the tax payable for the following year. Article 31 If an enterprise has paid an enterprise income tax that is less than the amount payable in accordance with the provisions of this Law due to the non-payment of tax on taxable income, the enterprise shall make up the tax payment and pay late payment interest in accordance with the relevant provisions of the State. Chapter Seven Administration of Tax Levying and Collection Article 32 The tax authority shall, in accordance with the law, perform the following duties: (1) To collect and inspect tax; (2) To investigate and punish tax evasion and tax fraud; (3) To provide guidance and consultation on tax issues to taxpayers; (4) To handle complaints and appeals from taxpayers; (5) To perform other duties related to tax levying and collection. Article 33 The taxpayer shall, in accordance with the law, perform the following duties: (1) To register for tax payment in a timely manner; (2) To truthfully and completely declare the taxable income and pay the tax on time; (3) To keep accounting books and accounting documents accurately and completely; (4) To cooperate with the tax authority in tax inspections and provide relevant information and materials truthfully and completely; (5) To perform other duties related to tax payment and administration. Article 34 The tax authority shall keep confidential the information obtained during the performance of its duties, and shall not disclose such information to any organization or individual without the consent of the taxpayer or in accordance with the law. Chapter Eight Supplementary Provisions Article 35 This Law shall come into force on January 1, 2008. Article 36 The Law of the People’s Republic of China on Foreign Investment Enterprises and the Law of the People’s Republic of China on Chinese-Foreign Equity Joint Ventures shall be repealed simultaneously. Article 37 The tax treaties concluded between the People’s Republic of China and foreign countries (regions) shall prevail in case of inconsistency with this Law