(Promulgated by the Ministry of Finance and the State Administration of Taxation on July 29, 1994)
Recently, tax bureaus of some provinces and municipalities reported that some provisions in Article 72 of the Rules for the Implementation of the Income Tax Law of the People's Republic of China on Enterprises with Foreign Investment and Foreign Enterprises (hereinafter referred to as the Rules) were found to be not clearly delineated in the course of actual implementation. After study, we hereby clarify the relevant items in Article 72 of the Rules as follows:
1. "Development of science and technology, geological surveys and industrial information consulting directly in service of production" as stipulated in Item (9) of Article 72 of the Rules refers to: scientific and technological results developed that cn directly constitute manufacturing technology of products or directly constitute management technology for production processes of products, or data and results from geological surveys that can be used directly in the development and utilization of various resources; and refers to: information consulting and development of computer software provided for these technologies or development and utilization of recourses, excluding service businesses such as accounting, auditing, law, asset valuation, market information and intermediary provided for various enterprises, and development of computer software not for technologies or development and utilization of resources as specified above.
2. If an enterprise with foreign investment specializes in the business of simple assembly, separate packaging, packaging, cleaning, selecting or arranging of purchased commodities for sale, and does not change the form, properties and components of the original commodities, it shall be deemed as engaging in the commodities sales and shall not be determined to be a productive enterprise with foreign investment. For instance, enterprises which engage in purchasing or importing various complete sets of electrical appliances or pieces of equipment and selling them after simple assembly; enterprises which engage in sales by purchasing various types of beverage or foodstuffs to carry out canning, repackaging or packaging, including the industry which specially provides services such as canning, repackaging or packaging.
If the productive enterprises with foreign investment previously determined by various localities are not in conformity with the principles of this Circular, the situation shall be rectified in accordance with the principles of this Circular. From now on, if it is difficult to make a determination due to special circumstances, the matter shall be reported to the State Administration of Taxation, which shall give an official reply upon verification to various localities for unified implementation.
