国发（1993）90号（December 25， 1993）
颁布日期：19931225 　实施日期：19940101 　颁布单位：国务院

The State Council approves the Application Program for Industrial and Commercial Tax System Reform of State Administration of Taxation， which is transmitted to you herewith for conscientious application and implementation.

The industrial and commercial tax system reform carried out this time is the largest in scale， widest in scope， and the most profound one in contents since the founding of the country， the purpose of which is to adapt to the requirements for establishing socialist market economy. This reform is bound to vigorously promote sustained， rapid and healthy development of socialist economy of our country. Therefore people's governments of respective provinces， autonomous regions and municipalities directly under the Central Government should pay more attention， strengthen the leadership and actually do a good job of organization and implementation of the Application Program for Industrial and Commercial Tax System Reform.

Application Program for Industrial and Commercial Tax System Reform

1. Basic Introduction on Present Industrial and Commercial Tax System

Basic frame of present industrial and commercial tax system （excluding tariff and agricultural tax） is formed after turning submission of profit into tax in the year of 1984 and an all-round reform on industrial and commercial tax system. Present industrial and commercial tax system takes turnover tax and income tax as main taxes and coordinated with other auxiliary taxes， 32 taxes in all. It is a kind of complex tax system with multiple taxes， stages and administrative levels in tax collection. Present industrial and commercial tax system broke through the distributive pattern of centralized arrangement for revenue and expenditure resulted from original planned economy， strengthened functions of taxation for achieving financial revenue and macro-adjustment and control， basically adapted to the requirement for economic development and economic restructuring in the past 10 years. However， there are still some imperfect aspects in present industrial and commercial tax system， especially the in adaptability to the requirement of developing socialist market economy， in handling distributive relations between the State， enterprises and individuals and also between the Central and local authorities. It is difficult to duly perform its regulatory function. The imperfections are mainly as follows：

（1） Unbalanced tax burden， which is unfavorable to fair competition between enterprises. There are different kinds of income taxes applicable to enterprises according to their ownership， with different tax rates and incentives. Policies indifferent regions differ from each other too. All these lead to unbalance in income tax burden； Turnover tax rate was designed under the conditions of taking planned price system as the main form for the purpose of alleviating contradictions in irrational price system， with more brackets in rate and great difference between brackets. Presently since price for most products has been liberalized， it will not be conducive to fair competition between enterprises without simplification and adjustment in tax rate.

（2） The distributive relations between the State and enterprise is neither uniform nor standardized. some unduly high tax rates make enterprises hard to bear， tax incentives in different names again make financial departments difficult to afford. Local governments and responsible departments also in various names charge considerable amount of administrative fee， respective kinds of funds and certain percentage as reserve etc. from enterprises. Overall burden on enterprises in inclined to be heavy.

（3） Demarcation in jurisdiction between the Central and local authorities in tax revenue and administration cannot adapt to the requirements of a thorough tax sharing system.

（4） The scope and degree of adjustment and control through taxation cannot adapt to the requirements of the market into which all productive elements enter. Regulation through taxation for land， capital and other markets is far from being well established.

（5） Contradictions are becoming more prominent day by day due to operation of 2 sets of tax system respectively applicable to enterprises with domestic or foreign investment.

（6） Regulations on tax administration and collection are not rigid， measures for tax administration and collection are out of date， consequently resulting in serious loss of tax revenue.

（7） Legal system on taxation is incomplete， a mechanism with legislation， jurisdiction and execution of tax laws being mutually independent and restrictive has not been established.

2. Guiding Thought and Basic Principles in Industrial and Commercial Tax System Reform

The guiding thought on industrial and commercial tax system reform is： to unify tax law， make tax liability fair， simplify tax system， reasonably share power， properly regulate distributive relations， guarantee financial revenue， establish a tax system adapting to the requirements of socialist market economy.

Following basic principles must be abided by in deepening industrial and commercial tax system reform：

（1） Tax system reform should be favorable to mobilizing the enthusiasm of both the Central and local authorities， and enhancing macro-adjustment and control capability of the Central Government. Tax system structure should be adjusted， with taxes categorized and tax rates determined rationally， so as to lay a foundation for tax sharing system and proper distributive relations between the Central and local authorities； Through tax system reform， gradually increase the proportion of tax revenue in gross national product， rationally determine the distributive proportion in financial revenue between the Central and local authorities.

（2） Tax system reform should be conducive to the performance of tax adjustment function in individuals' income and economic development among regions， to promote coordinated socioeconomic development and realize common prosperity.

（3） Tax system reform should facilitate the realization of fair tax burden and promotion of equal competition. Fair tax burden is the basic requirement for tax system in market economy， the existing problem of classification in tax category and rates according to different forms of ownership and different regions should be gradually solved， respective kinds of enterprises should have approximately equal tax burden through unification of enterprise income tax and perfection of turnover tax so as to create conditions for equal competition in the market by enterprises.

（4） Tax system reform should facilitate the embodiment of the state industrial policy， to promote adjustment of economic structure and the sustained， rapid and healthy development of national economy and the increase in overall efficiency.

（5） Tax system reform should facilitate simplification and standardization of taxes. Those taxes in adaptable to economic development should be repealed， those repetitiously set up should be unified， and adopt some taxes actually necessary， realize simplification and high efficiency in tax system； In dealing with the issue of distributive relations， international practice should be attended to as reference， standard practice in taxation should be adopted to the maximum， and the completeness of tax system should be protected， so as to safeguard the unification and sanctity of tax law.

3. Reform on Income Tax System

（1） Enterprise Income Tax

The goal of enterprise income tax reform is： to adjust and standardize distributive relations between the State and enterprises， promote transition of enterprise operation mechanism and realize fair competition. Main contents of enterprise income tax reform are：

i. Income tax for enterprises with domestic investment shall be unified as of January 1， 1994. Unification of income tax for enterprises with domestic or foreign investment shall be the next step.

ii. A flat income tax rate of 33% shall be applied for enterprises with domestic investment which is quite approaching the international tax rate. Taking into account the actual situation of some enterprises with low profitability， certaintransitional preferential measures may be taken.

Measures for administration and collection of income tax on financial and insurance business shall remain to be carried out according to original regulations.

iii. Allowable expenditure items and standard before paying enterprise income tax shall be standardized in tax laws， change the present practice that determination of taxable income is subject to enterprises financial system. Stabilize and broaden tax base， stiffen enterprise income tax.

iv. Abolish the Regulation Tax on State-Owned Enterprises and the fund for key construction projects of energy and communications and the fund for state budget adjustment levied on state-owned enterprises.

v. After implementation of General Rules Governing Enterprise Financial Affairs and Accounting Criteria for Enterprises， interest on loans by enterprises may be listed in the cost， together with accelerated depreciation， which provides financial source to a great extent for the payment of loans by enterprises， additionally with some other policies， all of these greatly increased enterprises' capacity for loan payment after paying tax. Therefore， while unifying enterprise income tax， simultaneously a new and standard loan payment system for enterprises shall be formulated.

vi. After unification of enterprise income tax， current practice of contracting enterprise income tax shall be changed.

（2） Individual Income Tax

The amendment draft of the Individual Income Tax Law of the People's Republic of China adopted at the 4th Meeting of the Standing Committee of the 8th National People's Congress on October 31， 1993， shall enter into force as of January 1st， 1994. The basic principles for individual income tax reform is to regulate the difference in income between individuals and alleviate the contradiction of unfair social distribution. For this purpose， Individual Income Tax shall be mainly levied on those with higher income， while whose with medium or low income shall be levied less or exempted.

Main contents of individual income tax reform are：

i. Original Individual Income tax， Regulation Tax on Individual's Income and Income Tax on Urban and Rural Individual Businesses shall be unified.

ii. The deductible threshold for expenditure in individual income tax. Basic living expenses shall be exempted from tax according to international practice， and monthly deductible amount from “income of wages and salaries” is determined to be RMB 800 Yuan. In application of the uniform Individual Income Tax Law， for both Chinese nationals and foreign nationals， additional deductible amount shall be stipulated for the latter， the specific amount and applicable scope shall be determined by the State Council.

iii. Taxable items have been appropriately adjusted， mainly with the addition of income from production or business operation， income from transfer of property and contingent income by individual businesses.

iv. Based on the reality of this country and with reference to practices of the developing or neighboring countries， tax rate of individual income tax is determined， in which income from wages and salaries shall be taxed at progressive rates ranging from 5% to 45%； income from production and business operation of individual businesses and income from contracted or leased operation of enterprises or institutions shall be taxed at progressive rates ranging from 5% to 35%， tax liability of which is roughly similar with that of enterprises； income from author's remuneration shall be taxed at a flat rate of 20% and the amount of tax payable however shall be reduced by 30%； and income from remuneration for services， royalties， interest， dividends， bonuses， lease of property and transfer of property， as well as contingent income and other income shall be taxed at a flat rate of 20%.

4. Reform on Turnover Tax System

Reform on turnover tax system is the key point in whole tax system reform. Existing turnover tax system comprises 3 main categories of taxes， i.e. Value-Added Tax（hereinafter referred to as VAT）， Product Tax and Business Tax. VAT is applicable to most part of industrial production field， small part of industrial products （tobacco， alcoholic drinks and alcohol， electricity， petroleum chemistry and chemical industry etc.） is subject to Products Tax， while Business Tax is mainly levied in the field of commerce and other tertiary industries.

Turnover tax system consists of， after the reform， VAT， Consumption Tax and Business Tax. VAT is generally levied in industrial production field， wholesale and retail commercial field， a small part of consumer goods is levied with Consumption Tax， and Business Tax is levied on the kind of service and sale of immovable property to which VAT is not applicable.

New turnover tax system is uniformly applicable to enterprises with domestic investment， and foreign investment and foreign enterprises （hereinafter referred to as foreign funded enterprises）， Consolidated Industrial and Commercial Tax applied to foreign funded enterprises shall be repealed. Agricultural， forestry， animal husbandry and aquatic products originally levied with Products Tax shall be levied with Special Agricultural Products Tax and Slaughter Tax.

Reform of turnover tax system should reflect principles of fairness， neutrality， transparency and universality， and overall tax burden shall remain basically identical to present level.

（1） VAT

i. VAT shall be levied on all the production， wholesale， retail and importation of goods， and shall not be applicable temporarily to most part of services and sale of immovable property.

ii. Model of VAT rate system shall adopt a basic rate， together with a low rate and a zero rate. According to the principle of keeping original tax burden unchanged， and considering the factor of tax base reduction after application of pricing system excluding tax， the basic rate of VAT is designed to be 17% （equal to tax rate of 14.5% on pricing method including tax）； the low rate is designed to be 13% （equal to tax rate of 11% on pricing method including tax） the applicable scope of which includes basic food and means of agricultural production etc.； while zero rate shall be applicable generally to export goods.

iii. VAT shall be levied through calculation on price without VAT， that is， VAT is calculated on goods price excluding VAT and with prescribed tax rate.

iv. Credit system based on indicated tax on invoice shall be carried out. Where goods are sold in respective stages before retail， VAT and price excluding VAT must be indicated on invoices according to relevant regulations. To adapt itself to consumers' custom in China， in retail stage of goods， hidden tax shall be applied with no separate indication of VAT on invoices.

v. For small scale tax payers whose annual sales amount is relatively less and accounting system is not sound， VAT shall be calculated in a simple way based on total sales amount and prescribed leviable rate.

vi. Reform VAT payment system. Special tax registration shall be required for VAT payers， also special VAT invoice shall be used， an investigation and inspection mechanism with cross auditing for both purchasing and selling parties of tax payers and an internal mechanism for avoidance of fiscal evasion and tax exemption and reduction shall be established.

vii. After abolishment of Consolidated Industrial and Commercial Tax for foreign funded enterprises and uniform application of VAT， Consumption Tax and Business Tax， some changes shall occur to tax burden. The burden for some enterprises may remain at the same level as that before the reform， some may reduce the burden slightly and others may increase somewhat. To guarantee the open policy of our country and the continuity and stability of foreign related taxation policy， the increase in tax burden to some enterprises should be solved through proper measures. The specific method is， the increased part of tax calculated on the tax system after the reform than before the reform， shall be refunded back once at the end of the year or in installments through the year after examination and approval by responsible tax authorities. The preferential period shall be limited to contract term， but the maximum shall not beyond the year of 1998. For newly set up foreign funded enterprises approved after January 1st， 1994， provisions regarding tax liability in mew tax law shall be applicable uniformly.

（2） Consumption Tax

After all products originally levied with Products Tax changed into levying of VAT， tax burden for quite an amount of products shall be reduced greatly. To safeguard national financial revenue， embodying the principle of maintaining identical tax burden as before， also in consideration of special adjustment on some consumer goods， small number of consumer goods shall be selectively levied with Consumption Tax on the basis of levying VAT. There are 11 tax able items for Consumption Tax， mainly including tobacco， alcoholic drinks and alcohol， cosmetics， precious jewelry， motorcycles， motor cars， gasoline， diesel oil etc. Calculation of tax payable for Consumption Tax shall follow either the amount on volume or the rate on value method. Consumption Tax payable under the rate on value method， shall be calculated according to the price excluding VAT， but including Consumption Tax， and the prescribed rate.

（3） Business Tax

The taxable scope of Business Tax after the reform consists of provision of service， transfer of intangible assets and sale of immovable properties. For communications and transportation， construction， posts and telecommunications， culture and sports etc. tax rate is 3%； for finance and insurance， services， transfer of intangible assets and sale of immovable properties etc. tax rate is 5%； for entertainment， tax rate is 5-20%.

Units and individuals performing the activities of the above-mentioned operation， transfer and sales shall be liable to pay Business Tax calculated on the turnover and prescribed tax rate.

5. Reform on Other Taxes

（1） Resource Tax

At present， Resource Tax is levied only on part of resource products and a number of enterprises engaged in the exploitation of resources， the leviable scope is restricted and tax burden is relatively light. To perfect the system of taxing resource products in China， the scope of Resource Tax after reform shall cover all mineral resources， tax able items shall include coal， crude oil， natural gas， iron ore and other ferrous metal ores， bauxite and other non-ferrous metal ores， non-metal ores and salt. Tax burden shall be adjusted properly in coordination with VAT reform.

Resource Tax shall be calculated in accordance with the assessable volume of the taxable products and the prescribed unit tax amount， a tax amount range is set up with the upper and lower limits. Tax amount may vary for the same kind of resource products with different exploiting conditions.

（2） Land Appreciation Tax

Land Appreciation Tax （hereinafter referred to as LAT） is formulated in order to adjust properly the unduly high profit from real estate transactions. LAT is levied in the transaction stage of real estate and on the appreciation amount of the proceeds from transaction. The appreciation amount shall be the balance of proceeds received by the tax payer on the transfer of real estate， after deducting the deductible items. The deductible items mainly consist of the sum paid for the acquisition of land use right， coats and expenses for the development of land， costs and expenses for the construction of new building for sale and facilities and the taxes related to the sale of real estate etc.

LAT shall adopt 4 level progressive rates as follows： For that part of the appreciation amount not exceeding 50% of the sum of deductible items， the tax rate shall be 30%； For that part of the appreciation amount exceeding 50%， but not exceeding 100%， of the sum of deductible items， the tax rate shall be 40%； For that part of the appreciation amount exceeding 100%， but not exceeding 200%， of the sum of deductible items， the tax rate shall be 50%； For that part of the appreciation amount exceeding 200% of the sum of deductible items， the tax rate shall be 60%.

（3） Securities Transaction Tax

Turn present measure to levy Stamp Tax on stock transaction into Securities Transaction Tax. Due to the fact that the Securities Law of the People's Republic of China is in the process of being examined by the Standing Committee of the National People's Congress， levy of the Securities Transaction Tax shall be introduced a little later for convenient dovetail.

（4） Urban and Rural Maintenance and Construction Tax

To reflect the correspondence principle of suing municipal facilities and tax liability， changes shall be effected in Urban and Rural Maintenance and Construction Tax from the present practice of an additional amount on turnover tax to calculation on the basis of sales proceeds； Present irrational tax rate structure shall be changed， for municipalities tax rate is 0.6%， for counties and township tax rate is 0.4%， for places except the above tax rate is 0.2%， Urban and Rural Maintenance and Construction Tax should be made one of the main taxes in local tax system. Foreign funded enterprises not liable to pay Urban and Rural Maintenance and Construction Tax at present should also become its taxpayers.

（5） Land Use Tax

Tax amount of Land Use Tax shall be increased properly， its applicable scope shall be enlarged， and devolution of administrative power shall be effected as appropriate.

（6） Other taxes to be regulated

i. Abolish Market Transaction Tax， Cattle Transaction Tax， Special Tax on Oil Fuel， Bonus Tax and Wages Adjustment Tax； ii. Merge Special Consumption Tax into Consumption Tax performing special adjustment function， and Salt Tax into Resource Tax； iii. Abolish Urban Estate Tax and License Tax on Vehicle and Vessel Use on foreign funded enterprises and foreign nationals， apply uniformly House Tax and Vehicle and Vessel Use Tax， and increase properly existing relatively low tax rate and tax amount； iv. Transfer Slaughter Tax and Entertainment Tax to localities； v. Start to levy Estate Tax.

32 kinds of taxes in the industrial and commercial tax system in China shall be reduced to 18 kinds of taxes after there form， tax system structure tends to be more rational， and its high efficiency and simplicity shall be realized preliminarily.

6. Reform on Administrative System of Tax Collection

After application of above reforms， a tax system structure adaptable to the requirement of socialist market economy system shall be formed. Simultaneously， reform on administrative system of tax collection must be promoted， thoroughly change the present situation that the administrative system of tax collection is not strict and the measures for tax collection are out of date， raise the administrative level of tax collection fundamentally， set up a scientific and strict administrative system of tax collection， so as to guarantee the implementation and application of tax laws and establish normal order in taxation.

（1） Set up universal tax return filing system. Tax return filing is the essential link for tax payers to fulfill their tax liability. Establishment of the system shall be helpful for forming a self-controlled mechanism for tax payers， enhancing the tax consciousness of the citizens， which is a basic project for tax authorities to perform effective administration of tax collection. After the establishment of tax return filing system， whoever fail to file returns in time， or file deceptive returns shall be considered as misbehavior of fiscal evasion and be penalized strictly according to law.

（2） Actively promote tax agency system. A system with social medium agencies such as public accountant offices， lawyers' offices etc. to manage tax affairs on behalf of tax payers， should be carried out according to international general practice， making the system gradually become an dispensable link in the administration of tax collection.

（3） Accelerate the process of computerization in the administration of tax collection. International experience has proved that it is the only way to build up a strict and efficient tax collection monitoring and controlling network through adopting advanced technology and facilities such as computers etc. in the administration of tax collection， which is also helpful for reducing the cost in tax administration. Due to the fact in our country that the scattered tax payers are relatively more， the foundation for computer management is not yet well laid， it may be considered to start computerization from the cities and the administration of tax collection in important taxes， then gradually shape a nation-wide computerization net covering the country both in length and width in administration of tax collection.

（4） Set up strict tax investigation and inspection system. After general application of tax return filing and tax agency systems， the main man-power of tax authorities shall turn to day-to-day important tax investigation and inspection， forming three-in-one administrative pattern of tax collection with tax return filing， tax agency and tax investigation and inspection， simultaneously supplemented with severe penalty for fiscal evasion behavior.

（5） To suit the needs of tax sharing system， organize two sets of tax organizations of the Central and local authorities.

（6） Determine the basic norms in taxation to meet the requirements of socialist market economy. At present， it is especially necessary to emphasize： Tax payers must pay their tax according to law， tax authorities must collect Tax according law； Tax must be levied according to the rate stipulated in the provisions of tax law， tax cannot be contracted and tax rate cannot be altered arbitrarily； All sales proceeds must be levied with tax to resist erosion on tax base； The tax that should be levied according to the value must be done so， eliminate the current policy of no tax on the proceeds resulted from increased price in some industries； Except tax exempt or reduced items stipulated in the tax law， governments at all levels and departments shall not create any precedent of tax exemption or reduction.

（7） The legislative power to build up central tax， and local tax uniformly applied through the country， shall be vested in the Central Government.

（8） Enforce legal system in taxation， speed up the completion of legislative procedure for tax law and regulations； Setup gradually the mutually independent and restrictive mechanism with tax law legislation， jurisdiction and enforcement.

After application of the above measures， a new pattern of tax administrative management shall be formed with four systematic lines of tax law and regulations， administration of tax collection， tax investigation and inspection， and tax review and appeal equally stressed， mutually harmonized and restrictive.

The Application Program for Industrial and Commercial Tax System Reform shall come into effect on January 1st， 1994 in the whole country.