Notification of the State Council on Carrying out the Transitional Preferential Policies concerning Enterprise Income Tax

The people\'s governments of all provinces, autonomous regions, municipalities directly under the Central Government, all ministries and commissions of the State Council, all institutions directly under the State Council,

The Enterprise Income Tax Law of the People\'s Republic of China (hereinafter referred to as the EITL) and the Regulation on Carrying out the Enterprise Income Tax Law of the People\'s Republic of China (hereinafter referred to as the RIEITL) shall put into effect as of January 1, 2008. According to Article 57 of the EITL, you are hereby informed of the following issues related to the preferential policies with regard to enterprise income tax:

1. The measures for the transition of preferential tax treatments to enterprises set up before the promulgation of the EITL

Enterprises enjoying the preferential policies with regard to enterprise income tax under the former tax law, administrative regulations and documents with the effects of administrative regulations shall be subject to a transition under the following measures:

Enterprises which enjoy the preferential policies of low tax rates in the past time shall be gradually transited to be enjoying the statutory tax rate within 5 years after carrying out the EITL as of January 1, 2008. Among them, the enterprises which enjoy the enterprise income tax rate of 15% shall be subject to the enterprise income tax rate of 18% in 2008, 20% in 2009, 22% in 2010, 24% in 2011 and 25% in 2012. The enterprises that enjoy the tax rate of 24% in the past time shall be subject to the tax rate of 25% as of 2008.

As of January 1, 2008, the enterprises that enjoy \"2-year exemption and 3-year half payment in the past time\", \"5-year exemption and 5-year half payment\" of the enterprise income tax and other preferential treatments in the form of periodic tax deductions and exemptions may, after carrying out the EITL, go on to enjoy the relevant preferential treatments under the preferential measures and the time period set down in the previous tax law, administrative regulations and relevant documents until the expiration of the said time period. However, Its preferential time period shall be counted from 2008 if such an enterprise has not enjoyed the preferential treatments yet because of its failure to make profits.

The expression \"enterprises enjoying the preferential policies\" as referred to above means the enterprises set up and registered in the industrial and commercial administrative department and in other registration administrative departments before March 16, 2007. The items and scope of the transitional preferential policies shall comply with the Table for carrying out Transitional Preferential Policy on Enterprise Income Tax (see Attached Table).

2. Continuously carrying out the preferential tax policies for the Western Development Program

According to the relevant documents of the State Council on implementing the Western Development Program, the preferential policies for Western Development Program with regard to enterprise income tax which is mentioned in the Notification of the Ministry of Finance, State Administration of Taxation and General Administration of Customs on the Preferential Policies for Western Development Program with regard to Enterprise Income Tax (Cai Shui [2001] No. 202) jointly promulgated by the Ministry of Finance, State Administration of Taxation and General Administration of Customs shall be carry out continuously.

3. Other provisions on carrying out transitional preferential policies with regard to enterprise income tax

An enterprise enjoying the transitional preferential policies with regard to enterprise income tax shall calculate the taxable income amount under the provisions of the EITL and the RIEITL concerning the incomes and deductions and shall compute and enjoy the preferential tax treatments under section 1 of this Notification.

An enterprise may choose the most preferential policies, if there is any overlap between the transitional preferential policies with regard to enterprise income tax and those as offered in the EITL and the RIEITL,. It fails to enjoy such policies repeatedly, and it shall not change it once it makes a choice,.

Attached Table: Table for Carrying out Transitional Preferential Policies on Enterprise Income Tax

State Council December 26, 2007

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