Circular of the State Administration of Taxation on Printing and Distributing the Replies to Questions concerning Business Tax (Part One)

Circular of the State Administration of Taxation on Printing and Distributing the Replies to Questions concerning Business Tax (Part One)
Circular of the State Administration of Taxation on Printing and Distributing the Replies to Questions concerning Business Tax (Part One)

Guo Shui Han Fa [1995] No. 156

April 17, 1995

Local taxation bureaus of provinces, autonomous regions, municipalities directly under the central government and cities specifically designated under the state plan,

There are various problems arising from the implementation of the new business tax rules. In order to help grass-roots taxation authorities and taxpayers better master the rules, the State Administration of Taxation has decided to compile and issue a series of documents entitled Replies to Questions Concerning Business Tax.
It is hereby issued, the Replies to Questions Concerning Business Tax (Part One) for implementation.

Appendix:
Replies to Questions Concerning Business Tax (Part One)

I. Q: Is the relief of business tax granted according to the old tax rules still be applicable after January 1, 1994 when the new rules regulating business tax are implemented?
A: The old rules regulating business tax have been voided since implementation of the new tax rules, therefore, the relief of business tax granted according to the old rules are not applicable any more. It is regulated in the Interim Regulations of the People's Republic of China on Business Tax that "Relief of business tax shall be set by the State Council and no local authorities or departments shall grant tax relief.", therefore, it is against the Tax Law to apply relief of business tax granted according to the old rules since implementation of the new tax rules from January 1, 1994.

II. Q: Shall business tax be levied on auctions of vehicle licenses held by the public security department and auctions of the bus line operation right held by the transportation department?
A: Auctions of vehicle licenses held by the public security department and auctions of the bus line operation right held by the transportation department are not covered by business tax, therefore, shall not be subjected to business tax.

III. Q: Shall business tax be levied on carriage of goods or passengers into China provided by transportation enterprises?
A: Item (2) of Article 7 under the Detailed Rules for Implementation of the Tentative Ordinance on Business Tax provides that "carriage of goods or passengers out of China" belongs to taxable services, in other words, carriage of goods or passengers into China does not belong to provision of taxable services and shall not be subjected to business tax.

IV. Q: Shall aircraft pesticide spray services provided by airlines be exempted from business tax?
A: Item (5) of Article 6 under the Interim Regulations of the People's Republic of China on Business Tax provides that agricultural pest control services shall be exempted from business tax, and Item (4) of Article 26 under the Detailed Rules for Implementation of the Tentative Ordinance on Business Tax provides that "agricultural pest control" refers to monitoring and control of plant diseases and pests for such industries as agriculture, forestry, animal husbandry and fishery. Aircraft pesticide spray is a kind of agricultural pest control services; and shall be exempted from business tax.

V. Q: Shall business tax be levied on construction and installation works undertaken by a construction team for their controlling units?
A: The answer may be different depending on whether the construction team is a unit with independent accounting or not. For a construction team with independent accounting, both the construction and installation works undertaken for its controlling unit (the "Controlling Unit") and those undertaken for other units shall be subjected to business tax. For a construction team without independent accounting, the construction and installation works undertaken for other units shall be subjected to business tax; and whether business tax shall be levied on those undertaken for its Controlling Unit will depend on whether the construction fees are paid by its Controlling Unit or not.
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