(Promulgated for implementation by Order No.134 of The State Council of People’s Republic of China on December 13, 1993, and amended and adopted by the 34th Executive Meeting of the State Council on November 5, 2008)

Article 1 All units and individuals engaged in the sales of goods, provision of processing, repairs and replacement services, and the importation of goods within the territory of the People’s Republic of China are taxpayers of Value-Added Tax (hereinafter referred to as “taxpayers”),and shall pay VAT in accordance with these Regulations.

Article 2 VAT rates:

 (I) For taxpayers selling or importing goods, other than those stipulated in items (2) and (3) of this Article, the tax rate shall be 17%.

(II) For taxpayers selling or importing the following goods, the tax rate shall be 13%:

1. Food grains, and edible vegetable oils;

2. Tap water, heating, air conditioning, hot water, coal gas, liquefied petroleum gas, natural gas, methane gas, coal/charcoal products for household use;

3. Books, newspapers, magazines;

 4. Feeds, chemical fertilizers, agricultural chemicals, agricultural machinery and covering plastic film for farming;

 5. Other goods as regulated by the State Council.

(III) For taxpayers exporting goods, the tax rate shall be 0%, except as otherwise stipulated by the State Council.

(IV) For taxpayer providing processing, repairs and replacement services (hereinafter referred to as “taxable services”), the tax rate shall be 17%.

Any adjustments to the tax rates shall be determined by the State Council.

Article 3 For taxpayers dealing in goods or providing taxable services with different tax rates shall be accounted for separately. If the sales amounts have not been accounted for separately, the higher tax rates shall apply.

Article 4 Except as stipulated in Article 11 of these Regulations, for taxpayers engaged in the sales of goods or the provision of taxable services (hereinafter referred to as “selling goods or taxable services”), the tax payable shall be the balance of output tax for the period after deducting the input tax for the period. The formula for computing the tax payable is as follows:

Tax payable=Output tax payable for the period-Input tax for the period

If the output tax for the period is less than and insufficient to offset against the input tax for the period, the excess input tax can be carried forward for set-off in the following periods.

Article 5 For taxpayers selling goods or taxable services, the output tax shall be the VAT payable calculated based on the sales amounts and the tax rates prescribed in Article 2 of these Regulations and collected from the purchasers. The formula for computing the output tax is as follows:

Output tax=Sales amount× Tax rate

Article 6 The sales amount shall be the total consideration and all other charges receivable from the purchasers by the taxpayer selling goods or taxable services, but excluding the output tax collectible, The sales amount shall be computed in RMB.