This English translation is for reference only. The Chinese version shall prevail in case of any inconsistencies.

Notice on the Policies of Value-Added Tax and Consumption Tax for the Development of Hengqin and Pingtan

(No. 51 [2014] of the Ministry of Finance and the State of Taxation Administration)

Departments of Finance of Guangdong Province and Fujian Province, State Taxation Administration, Guangdong Sub-Administration of GACC, Gongbei Customs, Fuzhou Customs:

To implement the spirit of the Reply of the State Council on Relevant Policies for the Development of Hengqin (Letter No. 85 [2011] of the State Council) and the Reply of the State Council on the Overall Development Plan for Pingtan Comprehensive Experimental Zone (No. 142 [2011] of the State Council), the following notice on the policies of value-added tax (VAT) and consumption tax for the development of Hengqin and Pingtan is hereby issued:

I. Policies on VAT and Consumption Tax Refunds

1. Goods sold from the Chinese mainland to Hengqin and Pingtan for production-related purposes shall be deemed as exports and are eligible for VAT and consumption tax refund policies, with the following exceptions:

(1)Export goods not eligible for VAT refund (exemption) or duty-free policies as stipulated by the Ministry of Finance and the State Taxation Administration.

(2) Goods procured for commercial real estate development projects in Hengqin and Pingtan.

The term "commercial real estate development projects" herein refers to the construction (including renovation and expansion) of hotels, office buildings, villas, apartments, residences, commercial shopping venues, entertainment service venues, restaurants, and other commercial real estate projects.

(3) Other goods sold from the Chinese mainland to Hengqin and Pingtan that are not eligible for tax refund. The specific scope is detailed in the attachment.

(4) Goods purchased by enterprises whose tax refund or exemption qualifications have been revoked according to the provisions of Article 5 of this notice.

2. For goods sold from the Chinese mainland to Hengqin and Pingtan that are eligible for VAT and consumption tax refund policies, export customs clearance procedures must be completed (excluding water, steam, electricity, and gas). The electronic information of the recordation list of imported goods will be provided by the General Administration of Customs (GACC) to the State Taxation Administration when goods enter Hengqin and Pingtan through the “second-line”.

3. For goods sold from the Chinese mainland to Hengqin and Pingtan eligible for VAT and consumption tax refund policies, the selling enterprise shall confirm the customs declaration form for export goods (special for export tax refund) at the China Electronic Port Data Center and provide it to the purchasing enterprises in Hengqin and Pingtan. The purchasing enterprises in Hengqin and Pingtan shall apply for a tax refund with the tax authorities, submitting the following documents: customs declaration form for export goods (special for export tax refund), recordation list of imported goods, VAT invoices, consumption tax invoices (for goods subject to consumption tax only), and any other documents required by the tax authorities.

The tax authorities shall verify the materials submitted by enterprises with the corresponding electronic information before processing the tax refund in accordance with regulations.

For goods that have been declared for a tax refund, the VAT amount indicated on the VAT invoice shall not be deductible as input VAT. Any input VAT that has been previously deducted shall not be reconsidered for a refund.

4. The refund formula is as follows:

Amount of VAT Refundable = Amount Indicated on the Special VAT Invoice for Purchased Goods × VAT Refund Rate Applicable to the Purchased Goods

For goods purchased from general taxpayers taxed under a simplified method and from small-scale taxpayers, the applicable VAT refund rate is determined based on the lower of the applicable levy rate and the refund rate.

Consumption Tax Refundable Amount = Amount Indicated on the Consumption Tax Payment Receipt for the Purchased Goods

II. Goods sold between enterprises within Hengqin or Pingtan are exempt from VAT and consumption tax. However, goods sold between enterprises for commercial real-estate projects within these zones and goods sold by enterprises whose tax refund or exemption qualifications have been canceled according to the provisions of Article 5 of this notice are subject to VAT and consumption tax according to regulations.

III. Goods in Hengqin and Pingtan that have already enjoyed tax exemption, bonded, or tax refund policies, when sold to the Chinese mainland, shall be subject to import taxation in compliance with the pertinent statutory provisions, with the exception of daily consumer products for which taxes have been duly paid at the “first-line”.

IV. For daily consumer products and other goods that have already paid taxes at the “first-line” and are sold to the Chinese mainland, the tax authorities shall levy VAT and consumption tax in accordance with current regulations.

V. Enterprises in Hengqin and Pingtan shall separately account for goods that are subject to tax refund or exemption according to Article 1 or Article 2 of this notice. Should the tax authorities find that enterprises have failed to maintain separate accounts as required, their qualifications for enjoying the tax refund and exemption policies provided in this notice shall be revoked for two years, and they shall be subject to penalties as stipulated by regulations.

VI. Commercial real-estate projects in Hengqin and Pingtan shall be jointly verified by the relevant industry management departments of their respective administrative committees, in conjunction with local finance and tax authorities.

VII. The specific administrative measures for the VAT and consumption tax refund and exemption policies in this notice shall be separately formulated by the State Taxation Administration.

VIII. This notice shall take effect from the date upon acceptance of the relevant regulatory facilities and the official commencement of customs operations within these areas. The implementation date for the VAT and consumption tax refund policies shall be based on the export date indicated on the custom declaration form for export goods (special for export tax refund).

Attachment: List of Goods Sold from the Chinese Mainland to Hengqin and Pingtan that are Not Eligible for Tax Refunds

Ministry of Finance  General Administration of Customs  State Taxation Administration

June 11, 2014

Attachment：

List of Goods Sold from the Chinese Mainland to Hengqin and Pingtan that are Not Eligible for Tax Refunds