State Administration of Taxation, Questions Concerning the Administration of Income Tax of Foreign-Investment Enterprises that Develop and Deal in Real Property Circular

Issued: December 20 2001
Effective: as of date of issue

Main contents: The Circular states that where a foreign investment enterprise or foreign enterprise (the Enterprise) engages in real property business, its taxable income shall be its current sales income minus current costs, expenses and losses, and its income tax payable shall be its taxable income times the applicable tax rate minus prepaid income tax for the real properties sold plus current prepayable income tax (Section One). Presale of real properties shall be subject to prepayable income tax (Section Two). Sales income shall be recognized on an accrual basis (Section Four). Current costs shall be determined on the basis of current salable area and salable unit construction cost (Section Five). Where a foreign enterprise has entered into an agreement with the Enterprise to underwrite the sale of the real properties, such underwriting shall be deemed transfers of properties within China and the foreign enterprise shall pay enterprise income tax on the incomes from such transfers (Section Eight).
Related legislation: PRC, Administration of Tax Collection Law (Revised in April 2001), Apr 28 2001, CLP 2001 No.5 p12 & CLP 1995 No.3 p12; PRC, Foreign Investment Enterprise and Foreign Enterprise Income Tax Law, April 9 1991, CLP 1991 No.3 p25 and State Administration of Taxation, Questions Concerning the Collection of Income Tax from Foreign Investment Enterprises Engaged in Real Property Development and Business Circular, 1995