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Circular of the State Administration of Taxation concerning the Matter that Foreign-invested and Operated Natural Gas Projects May Enjoy the Preferential Tax Treatment for Productive Enterprises Guo Shui Han [2007] No.602 The state taxation bureaus of all provinces, autonomous regions, municipalities directly under the Central Government and cities specifically designated in the state plan, and the local taxation bureaus of Guangdong Province, Hainan Province and Shenzhen Municipality: In accordance with the Income Tax Law of the People's Republic of China on Enterprises with Foreign Investment and Foreign Enterprises (hereinafter referred to as Tax Law), the Detailed Rules for its implementation and the related state provisions on classification of industries, we hereby, upon study, clarify the matters concerning the preferential tax policies applicable to foreign-invested projects of processing natural gas and constructing urban pipeline network for transmitting and allocating gas as follows: 1. By virtue of the fact that foreign-invested enterprises that engage in the processing and distribution of natural gas (including those simultaneously engaging in the construction of urban pipeline network for transmitting and allocating fuel gas) must go through a series of processing technological process such as analyzing the components of natural gas, purification, pressure modulation and odorizing before providing gas to users, and the quality standards and technical parameters are relatively high and different from simple processing, the industry such enterprises engage in shall be categorized to as the "industry of gas production and supply" in light of the classification of industries of national economy, and such enterprises shall fall within the scope of productive enterprises of "energy industry" as prescribed in Item 2 of Article 72 of the Detailed Rules for the Implementation of the Tax Law. Therefore, the business incomes such enterprises derive from processing and distributing gas and other related business shall enjoy the related preferential tax treatment. 2. As regards such foreign-invested enterprises as only engage in the construction and operation projects of urban pipeline network for transmitting and allocating gas, they fall within the scope of enterprises engaging in the construction and operation projects of energy and transportation infrastructures. Their operation incomes derived from urban pipeline network for transmitting and allocating gas may, aside from enjoying the preferential treatment for productive enterprises as prescribed by the Tax Law, enjoy the preferential tax treatment of a reduced tax rate of 15%, which applies to "energy and transportation construction projects" as prescribed in Item 1.3, Paragraph 1 of Article 73 of the Detailed Rules for the Implementation of the Tax Law. 3. As regards such foreign-invested enterprises established herebefore and engaging in the above-mentioned business to which what preferential tax treatment is applicable has not been determined by the tax authorities yet, the tax authorities shall determine the preferential tax treatment applicable to their incomes as derived since the production and operation year under the provisions of the present Circular. As regards those to which what preferential tax treatment is applicable has been determined by the tax authorities, the tax authorities shall make corresponding adjustment under the provisions of the present Circular with respect to their incomes derived since 2007. State Administration of Taxation May 30, 2007
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Promulgated by State Administration of Taxation on 2007-05-30
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