State Administration of Taxation, Questions Concerning Consumption Tax Policies on Liquor Products Circular

Issued: August 26 2002

Main contents: The Circular stipulates that the tax authority may re-assess the taxable income for consumption tax of a liquor producer if the liquor producer is found to have transactions with its affiliates that were not conducted at arm's length in terms of price. The re-assessment may be based on the price of the same or a similar transaction conducted on an arm's length basis (Section One). The Circular also states that the tax rate applicable to cereal-based white spirits applies to white spirits for which the ingredients cannot be determined clearly (Section Two). "Brand royalty" received by liquor producers from purchasers shall be deemed part of the sales revenue and subject to consumption tax (Section Three).
Related legislation: PRC Administration of the Levy and Collection of Taxes Law Implementing Rules