(Adopted at the 12nd Executive Meeting of the State Council on November

26, 1993, promulgated in Decree No.134 by the State Council of the People's
Republic of China on December 13, 1993 and effective as of January 1, 1994)

Full Text

        Article 1   All units and individuals engaged in the sales of goods,
provision of processing, repairs and replacement services, and the importation
of goods within the territory of the People's Republic of China are taxpayers
of Value-Added Tax (hereinafter referred to as 'taxpayers'), and shall pay VAT
in accordance with these Regulations.
       Article 2    VAT rates:
       (1) For taxpayers selling or importing goods, other than those stipulated
in items (2) and (3) of this Article, the tax rate shall be 17%.
       (2) For taxpayers selling or importing the following goods, the tax rate
shall be 13%:
       i. Food grains, edible vegetable oils;
       ii. Tap water, heating, air conditioning, hot water, coal gas, liquefied
petroleum gas, natural gas, methane gas, coal/charcoal products for household
use;
       iii. Books, newspapers, magazines;
       iv. Feeds, chemical fertilizers, agricultural chemicals, agricultural
machinery and covering plastic film for farming;
       v. Other goods as regulated by the State Council.
       (3) For taxpayers exporting goods, the tax rate shall be 0%, except as
otherwise stipulated by the State Council.
       (4) For taxpayers providing processing, repairs and replacement services
(hereinafter referred to as 'taxable services'), the tax rate shall be 17%.
       Any adjustments to the tax rates shall be determined by the State Council.
       Article 3　For taxpayers dealing in goods or providing taxable services
with different tax rates, the sales amounts for goods or taxable services with
different tax rates shall be accounted for separately. If the sales amounts
have not been accounted for separately, the higher tax rate shall apply.
       Article 4　Except as stipulated in Article 13 of these Regulations, for
taxpayers engaged in the sales of goods or the provision of taxable services
(hereinafer referred to as 'selling goods or taxable services'), the tax
payable shall be the balance of output tax for the period after deducting the
input tax for the period. The formula for computing the tax payable is as
follows:
       Tax payable = Output tax payable for the period - Input tax for the period
       If the output tax for the period is less than and insufficient to offset
against the input tax for the period, the excess input tax can be carried
forword for set-off in the following periods.
       Article 5　For taxpayers selling goods or taxable services, the output tax
shall be the VAT payable calculated based on the sales amounts and the tax
rates prescribed in Article 2 of these Regulations and collected from the
purchasers. The formula for computing the output tax is as follows:
       Output tax = Sales amount * Tax rate
       Article 6   The sales amount shall be the total consideration and all other
charges receivable from the purchasers by the taxpayer selling goods or
taxable services, but excluding the output tax collectible.
       The sales amount shall be computed in Renminbi. The sales amount of the
taxpayer settled in foreign currencies shall be converted into Renminbi
according to exchange rate prevailing in the foreign exchange market. 
       Article 7   Where the price used by the taxpayer in selling goods or
taxable services is obviously low and without proper justification, the sales
amount shall be determined by the competent tax authourties.
       Article 8   For taxpayers who purchase goods or receive taxable services
(hereinafter referred to as 'purchasing goods or taxable services'), VAT paid
or borne shall be the input tax.
       The amount of input tax that can be credited against the output tax, other
than the situations specified in Paragraph 3 of this Article, shall be
restricted to the amount of VAT payable as indicated on the following VAT
credit document:
       (1) VAT indicated in the special VAT invoices obtained from the sellers;
       (2) VAT indicated on the tax payment receipts obtained from the customs
office.
       The creditable input tax for the purchasing of tax exempt agricultural
products is calculated based on a deemed deduction rate at 10% on the actual
purchasing price. The formula for calculating the input tax is as follows:
       Input tax = Purchasing price * Deduction rate
       Article 9   Where taxpayers purchasing goods or taxable services have not
obtained and kept the VAT credit document in accordance with the regulations,
or the VAT payable and other relevant items in accordance with the regulations
are not indicated on the VAT credit document, no input tax shall be credited
against the output tax.
       Article 10   Input tax on the following items shall not be credited against
the output tax:
       (1) Fixed assets purchased;
       (2) Goods purchased or taxable services used for non-taxable items;
       (3) Goods purchased or taxable servides used for tax exempt items;
       (4) Goods purchased or taxable services used for group welfare or personal
consumption;
       (5) Abnormal losses of Goods purchased;
       (6) Goods purchased or taxable services consumed in the production of
work-in-progress or finished goods which suffer abnormal losses.
       Article 11   Small-scale taxpayers engaged in selling goods or taxable
services shall use a simplified method for calculating the tax payable.
       The criteria for small-scale taxpayers shall be regulated by the Ministry
of Finance.
       Article 12   The rate leviable on the small-scale taxpayers selling goods
or taxable services shall be 6%.
       Any adjustment to the leviable rate shall be determined by the State
Council.
       Article 13   For small-scale taxpayers selling goods or taxable services,
the tax payable shall be calculated based on the sales amount and the leviable
rate prescribed in Article 12 of these Regulations. No input tax shall be
creditable. The formula for calculating the tax payable is as follows:
       Tax payable = Sales amount * leviable rate
       The sales amount shall be determined in accordance with the stipulations
of Article 6 and Article 7 of these Regulations.
       Article 14   Small-scale taxpayers with sound accounting who can provide
accurate taxation information may, upon the approval of the competent tax
authorities, not be treated as small-scale taxpayers. The tax payable shall be
conmputed pursuant to the relevant stipulations of these Regulations.
       Article 15   For taxpayers importing goods, tax payable shall be computed
based on the composite assessable price and the tax rates prescribed in
Article 2 of these Regulations. No tax will be credited. The formulas for
computing the composite assessable price and the tax payable are as follows:
       Composite assessable price
              = Customs dutiable value + Customs Duty + Consumption Tax
       Tax payable = Composite assessable price * Tax rate
       Article 16   The following items shall be exempt from VAT:
       (1) Self-produced agricultural products sold by agricultural producers;
       (2) Contraceptive medicines and devices;
       (3) Antique books;
       (4) Importation of instruments and equipment directly used in scientific
research, experiment and education;
       (5) Importation of materials and equipment from foreign governments and
international organizations as assistance free of charge;
       (6) Equipment and machinery required to be imported under contract
processing, contract assembly and compensation trade;
       (7) Articles imported directly by organizations for the disabled for
special use by the disabled;
       (8) Sale of goods which have been used by the sellers.
       Except as stipulated in the above paragraph, the VAT exemption and
reduction items shall be regulated by the State Council. Local Governments or
departments shall not regulate any tax exemption or reduction items.
       Article 17   For taxpayers engaged in tax exempt or tax reduced items, the
sales amounts for tax exempt or tax reduced items shall be accounted for
separately. If the sales amounts have not been separately accounted for, no
exemption or reduction is allowed.
       Article 18   For taxpayers whose sales amounts have not reached the VAT
minimum threshold stipulated by the Ministry of Finance, the VAT shall be
exempt.
       Article 19   The time at which a liability to VAT arises is as follows:
       (1) For sales of goods or taxable services, it is the date on which the
sales sum is received or the documented evidence of right to collect the sales
sum is obtained.
       (2) For importation of goods, it is the date of import declaration.
       Article 20   VAT shall be collected by the tax authorities. VAT on the
importation of goods shall be collected by the customs office on behalf of the
tax authorities.
       VAT on self-used articles brought or mailed into China by individuals
shall be levied together with Customs Duty. The detailed measures shall be
formulated by the Tariff Policy Committee of the State Council together with
the relevant departments.
       Article 21   Taxpayers selling goods or taxable services shall issue
special VAT invoices to the purchasers. Sales amounts and output tax shall be
separately indicated in the special VAT invoices.
       Under one of the following situations, the invoice to be issued shall be
an ordinary invoice rather than the special VAT invoice:
       (1) Sale of goods or taxable services to consumers;
       (2) Sale of VAT exempt goods;
       (3) Sale of goods or taxable services by small-scale taxpayers.
       Article 22   The place for the payment of VAT is as follows:
       (1) Businesses with a fixed establishment shall report and pay tax with
the local competent tax authorities where the establishment is located. If the
head office and branch are not situated in the same county (or city), they
shall report and pay tax separately with their respective local competent tax
authorities. The head office may, upon the approval of the State
Administration for Taxation or its authorised tax authorities, report and pay
tax on a consolidated basis with the local competent tax authorities where the
head office is located.
       (2) Businesses with a fixed establishment selling goods in a different
county (or city) shall apply for the issuance of an outbound business
activities tax administration certificate from the local competent tax
authorities where the establishment is located and shall report and pay tax
with the local competent tax authorities where the establishmnent is located.
Businesses selling goods and taxable services in a different county (or city)
without the outbound business activities tax administration certificate issued
by the local competent tax authorities where the establishment is located,
shall report and pay tax with the local competent tax authorities where the
sales activities take place. The local competent tax authorities where the
establishment is located shall collect the overdue tax which has not been
reported and paid to the local competent tax authorities where the sales
activities take place.
       (3) Businesses without a fixed base selling goods or taxable services
shall report and pay tax with the local competent tax authorities where the
sales activities take place.
       (4) For importation of goods, the importer or his agent shall report and
pay tax to the customs office where the imports are declared.
       Article 23   The VAT assessable period shall be one day, three days, five
days, ten days, fifteen days or one month. The actual assessable period of the
taxpayer shall be determined by the competent tax authorities according to the
magnitude of the tax payable of the taxpayer; tax that cannot be assessed in
regular periods may be assessed on a transaction-by-transaction basis.
       Taxpayers that adopt one month as an assessable period shall report and
pay tax within ten days following the end of the period. If an assessable
period of one day, three days, five days, ten days or fifteen days is adopted,
the tax shall be prepaid within five days following the end of the period and
a monthly return shall be filed with any balance of tax due settled within ten
days from the first day of the following month.
       Article 24   Taxpayers importing goods shall pay tax within seven days
after the issuance of the tax payment certificates by the customs office.
       Article 25   Taxpayers exporting goods with the appliable 0% tax rate
shall, upon completion of export procedures with the customs office, apply for
the tax refund on those export goods to the tax authorities on a monthly basis
based on such relevant documents as the export declaration document. The
detailed measures shall be formulated by the State Administration for
Taxation. 
       Where the return of goods or the withdrawal of the customs declaration
occurs after the completion of the tax refund on the export goods, the
taxpayer shall repay the tax refunded according to the laws.
       Article 26   The collection and administration of VAT shall be conducted in
accordance with the relevant provisions of the Law of the People's Republic of
China on Tax Collection and Administration and these Regulations.
       Article 27   The collection of VAT from foreign investment enterprises and
foreign enterprises shall be conducted in accordance with the resolutions of
the Standing Committee of the National People's Congress.
       Article 28   The Ministry of Finance shall be responsible for the
interpretation of these Regulations and for the formulation of the rules for
the implementation of these Regulations.
       Article 29   These Regulations shall come into effect from January 1, 1994.
The Draft Regulations of the People's Republic of China on Value-Added Tax and
the Draft Regulations of the People's Republic of China on Product Tax
promulgated by the State Council on September 18, 1984 shall be superseded on
the same date.