Supplementary Circular of the State Administration of Taxation on Relevant Issues concerning Collection of Value-Added Tax on Goods Transferred between Affiliates of the Same Enterprise

Supplementary Circular of the State Administration of Taxation on Relevant Issues concerning Collection of Value-Added Tax on Goods Transferred between Affiliates of the Same Enterprise
Supplementary Circular of the State Administration of Taxation on Relevant Issues concerning Collection of Value-Added Tax on Goods Transferred between Affiliates of the Same Enterprise

Guo Shui Han Fa [1998] No. 718

December 3, 1998

The Offices of the State Administration of Taxation and local taxation bureaus at all provinces, autonomous regions, municipalities directly under the Central Government and cities specifically designated in the state plan,

After distribution of the Circular of the State Administration of Taxation on Issues Concerning the Imposition of Value-added Tax on the Transfer of Goods Between Institutions Affiliated to the Same Enterprise (Guo Shui Fa [1998] No. 137), requests are raised from the local offices on clarification of the execution time of the Circular, and advices are presented to take measures for the purpose to investigate and prosecute the tax dodging concerning the goods transferring. As a result of studying, the relevant issues are hereby notified as follows:

I. The Circular of Guo Shui Fa [1998] No. 137 shall be the interpretation of item 3 of Article 4 of the Detailed Rules for the Implementation of the Interim Regulation of the People's Republic of China on Value-added Tax, and shall come into force as of the date of implementation of the Detailed Rules. However, the concept of "distribution" in the above item of the Detailed Rules was not clarified before the issuance of the Circular of Guo Shui Fa [1998] No. 137, and it has resulted in different understanding by the local tax authorities and taxpayers in different regions as well as different implementation. In light of such practical situations, in order to avoid material influence to the businesses operation of enterprises and accounting of financial status, the State Administration of Taxation has decided that, taking September 1, 1998 as line of demarcation, where an affiliate of an enterprise has incurred the distribution prescribed in the Circular of Guo Shui Fa [1998] No.
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