The Enterprise Income Tax Law of the People's Republic of China adopted at the fifth Session of the tenth National People's Congress of the People's Republic of China on March 16, 2007, is hereby promulgated and shall become effective from January 1, 2008.

Contents
Chapter I General Provisions
Chapter II Taxable Amount of Income
Chapter III Amount of Payable Taxes
Chapter IV Preferential Tax Treatment
Chapter V Withholding by Sources
Chapter VI Special Adjustments to Tax Payments
Chapter VII Administration of Tax Collection
Chapter VIII Supplementary Provisions

Article 1    Within the territory of the People's Republic of China, enterprises and other organizations that have income (hereinafter, "enterprises") shall be payers of enterprise income tax and shall pay their enterprise income taxes in accordance with this Law.
This Law does not apply to sole proprietorship enterprises and partnership enterprises.

Article 2    Enterprises are classified into resident and non-resident enterprises.
For the purposes of this Law, a resident enterprise shall mean an enterprise that is established within the territory of China, or which is established under the law of a foreign country (region) but whose actual office of management is located inside China.
For the purposes of this Law, a non-resident enterprise shall mean an enterprise established under the law of a foreign country (region), whose actual institution of management is not located inside China but which has offices or establishments inside China; or which does not have any offices or establishments located inside China but has incomes sourced in China.

Article 3    A resident enterprise shall pay enterprise income tax on its incomes derived both within and outside China.
For a non-resident enterprise having offices or establishments located inside China, it shall pay enterprise income tax on its incomes derived from China as well as on incomes that it earns outside China but which have actual connection with the said offices or establishments.
For a non-resident enterprise having no office or establishment located inside China, or for a non-resident enterprise whose incomes have no actual connection to its institution or establishment inside China, it shall pay enterprise income tax on the incomes derived from China.

Article 4    The enterprise income tax rate shall be 25%.
The tax rate that applies to a non-resident enterprise's incomes as mentioned in Paragraph 3 of Article 3 of this Law shall be 20%.

Article 5    The balance, after deducting the tax-free incomes, tax-exempt incomes, all deduction items as well as the permitted remedies for losses of the previous year(s) from an enterprise's total amount of incomes of each tax year, shall be the taxable amount of incomes.

Article 6    An enterprise's monetary and non-monetary incomes from various sources shall be the total amount of incomes, including:
(1) Income from the sale of goods;
(2) Income from the provision of labor services;
(3) Income from the transfer of property;
(4) Dividend, bonus and other equity investment proceeds;
(5) Income from interests;
(6 ) Income from rentals;
(7) Income from royalties;
(8) Income from accepted donations; and
(9) Other incomes.

Article 7    The following incomes included in the total amount of income shall be tax-free incomes:
(1) The appropriations from the treasury;
(2) The administrative fees and the governmental funds that are charged in accordance with the law and fall under the treasury administration; and
(3) Other tax-free incomes as prescribed by the State Council.

Article 8    The reasonable expenditures that are actually incurred and which have actual connection with the business operations of an enterprise, including the costs, expenses, taxes, losses, etc., may be deducted in the calculation of the taxable amount of incomes.

Article 9    With regard to an enterprise's expenditures for public welfare donations, the portion that accounts for 12% of the total annual profits, or less, is allowed to be deducted.

Article 10    None of the following expenditures may be deducted in the calculation of the taxable amount of incomes:
(1) Dividend, bonus and other equity investment proceeds paid to the investors;
(2) Payment for enterprise income tax;
(3) Late fee for taxes;
(4) Penalty, fines, and losses of properties confiscated;
(5) Expenditures for donations other than those provided for in Article 9;
(6) Sponsorship expenditures;
(7) Unverified reserve expenditures;
(8) Other expenditures that are not related to the obtainment of revenues;

Article 11    When calculating the taxable amount of incomes, an enterprise shall be allowed to deduct the depreciation of fixed assets calculated according to the relevant provisions.
No depreciation may be calculated for any of the following fixed assets:
(1) Fixed assets that have not yet been put into use, excluding houses and buildings;
(2) Fixed assets rented in by way of operating lease;
(3) Fixed assets rented out by way of finance leasing;
(4) Fixed assets for which depreciation has been allocated in full amount but which remain in use;
(5) Fixed assets not related to the business operations;
(6) Land that is separately evaluated as an item of fixed asset in the account; and
(7) Other fixed assets for which no depreciation may be calculated.

Article 12    When calculating the taxable amount of incomes, an enterprise shall be allowed to deduct the amortized expenses of intangible assets calculated according to the relevant provisions.
No amortized expense may be calculated for the following intangible assets:
(1) Intangible assets, for which the expenses incurred for the development thereof on its own have been deducted in the calculation of the taxable amount of incomes;
(2) Business reputation created by the enterprise itself;
(3) Intangible assets not related to the business operations; and
(4) Other intangible assets for which no amortized expense may be calculated.

Article 13    The following expenses incurred by an enterprise shall, in the calculation of the taxable amount of incomes, be treated as long-term deferred expenses. Those amortized according to the relevant provisions shall be allowed to be deducted:
(1) The expenses for rebuilding a fixed asset, for which the depreciation has been allocated in full amount;
(2) The expenses for the rebuilding of a rented fixed asset;
(3) The expenses for major repair of a fixed asset; and
(4) Other expenses that shall be treated as long-term deferred expenses.

Article 14    During the period of investment to others, an enterprise shall not deduct the costs of the investment assets when calculating the taxable amount of incomes.

Article 15    Where an enterprise uses or sells its inventories, it shall be allowed to deduct the costs of the inventories calculated according to the relevant provisions when calculating the taxable amount of incomes.

Article 16    Where an enterprise transfers an asset, it shall be allowed to deduct the net value of the asset when calculating the taxable amount of incomes.

Article 17    When an enterprise calculates its enterprise income taxes on a consolidated basis, it shall not offset the losses of its overseas business institutions against the profits of its domestic business institutions.

Article 18    The losses incurred by an enterprise during a tax year may be carried forward and subtracted from the incomes during subsequent years for a maximum carry-forward period of five years.

Article 19    Where a non-resident enterprise obtains incomes as described in Paragraph 3 of Article 3 of this Law, it shall calculate the taxable amount of income through the following approaches:
(1) The taxable amount of incomes from dividends, bonuses and other equity investment proceeds, interests, rentals and royalties shall be based on the total amount of incomes;
(2) The taxable amount of incomes from the transfer of property shall be the balance of the total amount of incomes deducted by the net value of the property; and
(3) The taxable amount of any other income shall be calculated by reference to the approaches as mentioned in the preceding two items.

Article 20    The specific measures for the scope and criteria of revenues and deductions, as well as the tax treatment of assets as provided for in this Chapter, shall be formulated by the treasury and tax administrative departments of the State Council.

Article 21    When calculating the taxable amount of incomes, if the enterprise's financial or accounting treatment method does not conform to any tax law or administrative regulation, the taxable amount shall be calculated in accordance with the tax law or administrative regulation.

Article 22    The amount of payable taxes shall be the balance of the taxable amount multiplied by the applicable tax rate minus the tax amounts deductible and exemptible as provided for in this Law.

Article 23    With respect to the amount of the income tax on the following incomes, which has been paid by an enterprise overseas, the said amount may be deducted or exempted from the enterprise's payable tax in the then-current period. The limit for such deduction or exemption shall be the payable amount of taxes on such incomes calculated according to the provisions of this Law. The portion exceeding the limit for deduction and exemption may, within the subsequent period of five years, be offset against the balance between the limit for deduction and exemption of each year and the deductible and exemptible amount of the then-current year:
(1) A resident enterprise's taxable incomes derived outside China; and
(2) Taxable incomes earned outside China by a non-resident enterprise having offices or establishments in China, but which have actual connection with the said offices or establishments.

Article 24    For the dividends, bonuses and other equity investment proceeds derived outside China, which a resident enterprise obtains from its directly or indirectly controlled foreign enterprise, the income tax paid by the foreign enterprise outside China for the said incomes may be treated as the allowable overseas income tax credit of the resident enterprise and may be deducted or exempted within the limit of tax credit as specified in Article 23 of this Law.

Article 25    Preferential enterprise income tax is granted to important industries and projects the development of which is supported and encouraged by the State.

Article 26    The following incomes of an enterprise shall be tax-free incomes:
(1) The income from treasury bonds;
(2) Dividends, bonuses and other equity investment proceeds distributed between qualified resident enterprises;
(3) Dividends, bonuses and other equity investment proceeds that a non-resident enterprise with institutions or establishments in China obtains from a resident enterprise and which have actual connection with such institutions or establishments; and
(4) Incomes of qualified non-profit organizations.

Article 27    The enterprise income tax on the following incomes may be exempted or reduced:
(1) The incomes accrued from projects of agriculture, forestry, animal husbandry and fishery;
(2) The incomes accrued from business operations of important public infrastructure investment projects supported by the State;
(3) The income accrued from projects of environmental protection, energy and water saving, which meet the relevant requirements;
(4) The incomes accrued from the transfer of technologies, which meets the relevant requirements; and
(5) The incomes as specified in Paragraph 3 of Article 3 of this Law.

Article 28    The enterprise income tax on a small meager-profit enterprise which meets the prescribed conditions shall be levied at a reduced tax rate of 20%.
The enterprise income tax on important high and new-tech enterprises which require support by the State shall be levied at a reduced tax rate of 15%.

Article 29    The autonomous organ of an autonomous region of ethnic minorities may decide upon the reduction or exemption of the local portion of the enterprise income tax to be paid by enterprises within the said autonomous region. The decisions of deduction or exemption made by an autonomous prefecture or county shall be submitted to the people's government of the province, autonomous region, or municipality directly under the Central Government for approval.

Article 30    The following expenses of an enterprise may be additionally calculated and deducted:
(1) The expenses for the research and development of new technologies, new products and new techniques; and
(2) The wages paid to disabled employees or other employees whose employment the State encourages.

Article 31    With regard to a venture capital enterprise engaged in important venture capital investments requiring support and encouragement by the State, taxable amount of incomes may be deducted according to  a certain proportion of the amount of investment.

Article 32    Where it is imperative to accelerate the depreciation of any fixed asset of an enterprise due to technological progress or due to any other cause, the term of depreciation may be shortened or an approach to accelerate the depreciation may be adopted.

Article 33    The incomes generated by an enterprise from producing products conforming to the industrial policies of the State, by way of comprehensive utilization of resources, may be downsized in the calculation of the amount of taxable incomes.

Article 34    The amount of an enterprise's investment in the purchase of special equipment for environmental protection, energy and water saving, work safety, etc., may be deducted from the tax amount at a certain rate.

Article 35    The specific measures for the preferential tax treatments as mentioned in this Law shall be formulated by the State Council.

Article 36    Where the national economic and social development so require, or where the business operations of enterprises have been seriously affected by emergencies and other factors, the State Council may formulate special preferential policies concerning the enterprise income tax and submit them to the Standing Committee of the National People's Congress for record filing.

Article 37    The payable income taxes on the incomes as specified in Paragraph 3of Article 3 of this Law which a non-resident enterprise earns shall be withheld at sources, with the payer acting as the obligatory withholder. The tax amount shall be withheld by the obligatory withholder from each payment or payment due.

Article 38    For the payable income taxes on the incomes which a non-resident enterprise obtains from undertaking an engineering project or providing labor services inside China, the taxation authority may designate as the obligatory withholder, the payer of the project price or remuneration.

Article 39    For the income tax that shall be withheld according to Articles 37 and 38 of this Law but which the obligatory withholder has failed to withhold or in respect of which the withholder is unable to perform the withholding obligation, the taxpayer shall pay them at the place where the income has accrued. If the taxpayer fails to do so, the taxation authority may recover the payable tax of the enterprise from its other income items inside China which shall be borne by the payer.

Article 40    An obligatory withholder shall turn over the tax payments, withheld periodically, to the State treasury within seven days from the date of withholding and submit to the local taxation organ a form of report on the withheld enterprise income taxes.

Article 41    With regard to transactions between an enterprise and its affiliated parties, if the taxable revenue or income of the enterprise or its affiliated parties decreases due to nonconformity with the arms length principle, the taxation authority may make an adjustment through a reasonable method.
The costs of an enterprise and its affiliated parties for joint development or accepting the assignment of intangible assets, or jointly providing or accepting labor services shall, according to the arms length principle, be apportioned in the calculation of the taxable amount of incomes.

Article 42    An enterprise may file with the taxation authority, the pricing principles and computation approaches, for its transactions  with its affiliated parties. The taxation authority and the enterprise shall enter into a pricing pre-arrangement upon negotiations and confirmation.

Article 43    When an enterprise submits to the taxation authority its annual enterprise income tax returns, it shall attach an annual report on its affiliated transactions with its affiliated parties.
When the taxation authority conducts investigation into the affiliated transactions, the enterprise and its affiliated parties, as well as other enterprises relating to the affiliated transactions under investigation, shall provide pertinent materials according to the relevant provisions.

Article 44    Where any enterprise refuses to provide the materials of its transactions  with its affiliated parties, or provides any false or incomplete materials which cannot reflect the true information about the affiliated transactions, the taxation authority shall have the right to verify its taxable amount of income in accordance with the law.

Article 45    With regard to an enterprise established by a resident enterprise or controlled by an resident enterprise or by a Chinese resident and located in a country (region) where the actual tax burden is comparatively lower than that under the tax rate as specified in Paragraph 1 of Article 4 of this Law, if the profits are not distributed or if less profits are distributed for a cause not attributable to reasonable business operations, the portion of the aforesaid profits attributable to this resident enterprise shall be included in its incomes for the current period.

Article 46    The interest disbursement for any credit investments and equity investments, which an enterprise accepts from its affiliated parties, in excess of the prescribed criterion, shall not be deducted in the calculation of the taxable amount of income.

Article 47    Where an enterprise makes any other arrangement without any reasonable business purpose, and if its taxable revenue or income decreases, the taxation authority has the power to make an adjustment through a reasonable method.

Article 49    The administration of the collection of enterprise income taxes shall be governed by the Law of the People's Republic of China on the Administration of Tax Collection in addition to this Law.

Article 50    Unless otherwise provided for in any tax law or administrative regulation, the place of tax payment of a resident enterprise shall be the registration place of the said enterprise. But if its registration place is outside of China, the tax payment place shall be the place where its institution of actual management is located.
A resident enterprise which has established operational institutions without legal person status in China shall calculate and pay its enterprise income taxes on a consolidated basis.

Article 51    Where a non-resident enterprise obtains any income as specified in Paragraph 2 of Article 3 of this Law, the place of tax payment shall be the place where the institution or establishment is located. Where a non-resident enterprise has established two or more institutions or establishments within China, it may, subject to the examination and approval of the taxation authority, choose to have its main institution or establishment pay the enterprise income tax on a consolidated basis.
For a non-resident enterprise which obtains any income as specified in Paragraph 3 of Article 3 of this Law, the place where the obligatory withholder is located shall be the place for the payment of enterprise income taxes.

Article 52    Unless otherwise provided for by the State Council, different enterprises shall not pay their enterprise income taxes on a consolidated basis.

Article 53    Enterprise income taxes shall be calculated on the basis of a tax year. A tax year commences on 1 January and ends on 31 December of the solar calendar year.
Where an enterprise starts or terminates its business operations in the middle of a tax year so that its actual business operation period in this tax year is shorter than 12 months, its actual business operation period shall constitute a tax year.
At the time of lawful liquidation of an enterprise, the liquidation period shall be a tax year.

Article 54    Enterprise income taxes shall be paid in advance on a monthly or quarterly basis.
An enterprise shall, within 15 days after the end of a month or quarter, submit to the taxation authority an enterprise income tax return for advance payment and pay the tax in advance.
An enterprise shall, within five months after the end of each year, submit to the taxation authority an annual enterprise income tax return for the settlement of tax payments and settle the payable or refundable amount of taxes.
When an enterprise submits an enterprise income tax return, it shall attach thereto the financial statements and other relevant materials according to the relevant provisions.

Article 55    When an enterprise terminates its business operation in the middle of a year, it shall, within 60 days after the actual date of termination of its business operations, apply to the taxation authority for calculating and paying the enterprise income taxes of the then-current period.
Before an enterprise goes through the deregistration formalities, it shall make a declaration to the taxation authority on the liquidation and shall pay the enterprise income taxes.

Article 56    Enterprise income taxes to be paid under this law shall be calculated on the basis of RMB. For any income calculated on the basis of a currency other than RMB, the amount of taxes shall be calculated and paid after this income is converted into RMB.

Article 57    The enterprises which have already been established prior to the promulgation of this Law and enjoy low tax rates according to the provisions of the prevailing tax laws and administrative regulations at that time may, according to the provisions of the State Council, continue to enjoy the preferential treatments within five years after this Law is promulgated and gradually transfer to the tax rate as provided for in this Law. Those which enjoy the preferential treatment of tax exemption for a fixed term may, according to the provisions of the State Council, continue to enjoy such treatment after the promulgation of the present Law until the fix term expires. However, for those that do not enjoy the preferential treatment due to failure to make profits, the term of preferential treatment may be counted as of the year when this Law is promulgated.
Within the particular areas established by the law for developing foreign economic cooperation and technological exchanges and the newly established high- and new-tech enterprises that need the key support of the State within the areas where the State Council has provided for the implementation of the abovementioned special policies may continue to enjoy transitional preferential tax treatments, with the specific measures thereof to be formulated by the State Council separately.
Other enterprises falling within the encouraged category as already determined by the State Council may enjoy the preferential treatment of tax reduction or exemption according to the provisions of the State Council.

Article 58    Where any provision in a tax treaty concluded between the government of the People's Republic of China and a foreign government is different from the provisions in this Law, the provision in the said treaty shall prevail.

Article 59    Implementing regulations shall be formulated by the State Council according to this Law.

Article 60    This law shall become effective from 1 January  2008. The Law of the People's Republic of China on the Income Tax of Foreign-Invested Enterprises and Foreign Enterprises as adopted at the 4th Session of the Standing Committee of the 7th National People's Congress on 9 April 1991 and the Interim Rules of the People's Republic of China on Enterprise Income Tax as promulgated by the State Council on 13 December 1993 shall be repealed simultaneously.