(Issued by the Ministry of Finance and the State Taxation Administration on June 7, 2000)

In order to protect ecological environment, promote the production and consumption of automobiles with low pollution discharge and encourage the progress of technology of the automobile industry, with the approval of the State Council, a policy for reducing taxation of the consumption tax on sedan cars with low pollution discharge is to be implemented. Issues relevant are notified as follows:

1. The consumption tax on the production and sales of sedan cars, cross country vehicles and passenger cars which have attained the limited value of pollution discharge shall be reduced by 30 percent.

The computing formula: The reduced tax amount = the amount of the consumption tax calculated in line with the legal tariff rate x 30 % 

The dutiable amount = The consumption tax amount calculated in accordance with the legal tax rates - the reduced tax amount

The limited value of low pollution discharge is equivalent to the 94/12/EC, 96/69/EC discharge standard instructed by the European Communities ("the European No. II Standard" for short).

2. Automobile production enterprises shall directly file an application to the Ministry of Finance and the State Adiministration Taxation for the reduction of the consumption tax and, at the same time, submit the application to the State MachineBuilding Industry Bureau and the State Environmental Protection Administration. The Ministry of Finance and the State

Taxation Adiministration shall, together with the State Machine Building Industry Bureau and the State Environmental Protection Administration, examine, verify and identify the application; if the type of the car has indeed reached the limited value of low pollution discharge upon examination and verification, the implementation document shall be jointly issued by the Ministry of Finance and the State Taxation Adiministration and the duplicate shall be sent to the State MachineBuilding Industry Bureau, the State Environmental Protection Administration  and relevant automobile production enterprises.

The applications of the automobile production enterprises which have not been listed in the National Production Enterprises and Catalog of Automobiles, Refitted Cars for Civilian Use and Motorcycles shall not be accepted.

3. Materials that must be submitted for applying for reducing the consumption tax are follows: 

(1) The written application.

(2) The survey report on the automobile samples that have attained the target for low pollution discharge issued by the quality inspection organization jointly accepted by the Ministry of Finance, the State of Taxation Adiministration, the State MachineBuilding Industry Bureau and the State Environmental Protection Administration.

(3) The production uniformity qualification report for the automobile production enterprises that have attained the limited value of low pollution discharge approved by the state automobile industry administrative department and the State Environmental Protection Administration .

(4) Other materials the enterprises are asked to submit in addition by the Ministry of Finance and the State Taxation  Adiministration in line with the specific conditions.

4. Inspection of Meeting the Standard

(1) Sample Inspection

The Ministry of Finance, the State Taxation Adiministration, the State Machine Building Industry Bureau and the State Environmental Protection Administration accept the State Sedan Quality Supervision and Inspection Center, the State Automobile Quality Supervision and Inspection Center and the State Automobile Quality Supervision and Inspection Center (Xiangfan) as the quality inspection authorities for the limited value of low pollution discharge of sedan cars ("inspection authorities").

The automobile production enterprises can choose by themselves one of the three above-mentioned inspection authorities without any affiliated relations for the inspection of their samples. Otherwise, the qualified report made by the inspection authorities will be invalid.

The affiliated relations refer to direct and indirect holding or controlling relations in funds, business and purchase and sales between the automobile quality inspection authority and the automobile production enterprise, or have the direct and indirect relations held or controlled by a the third party, or have the related affiliated relations in other interests.

(2) Inspection of Production Uniformity 

The Ministry of Finance and the State 

Taxation Adiministration entrust the State Machine Building Industry Bureau and the State Environmental Protection Administration to organize the production uniformity certification authorities and relevant experts for the examination, verification and inspection of production uniformity of the automobile production enterprises that apply for the reduction of the consumption tax.

The production uniformity inspection report and the examination procedures shall be formulated separately by the State Machine Building Industry Bureau through consultations with the Ministry of Finance, the State Taxation Adiministration and the State Environmental Protection Administration.

(3) The State Machine-Building Industry Bureau and the State Environmental Protection Administration shall, within ten days upon completion of the inspection, submit the list of the enterprises and car types whose inspection has been up to the standard to the Ministry of Finance and the State Taxation Adiministration.

5. Tax Administration and Punishment

(1) The competent authorities of the State Bureau of Taxation in charge of implementing the reduction of the consumption tax on sedans shall check on strictly, earnestly implement the policy and make a good job of supervision and management. The state bureaus of taxation in various provinces (cities) shall, before January 30 each year, collect the sales volume, quantity of sales and the amount of the reduced tax of the car types with low pollution discharge of the preceding year for the State Bureau of Taxation Adiministration and the Ministry of Finance.

(2) The automobile production enterprises shall keep separately the sales amount and the sales value of the car types with the approved reduction of the consumption tax. Otherwise, the tax authorities will not reduce the consumption tax.

(3) The Ministry of Finance and the State Bureau of Taxation may organize or entrust relevant authorities to inspect the pollution discharge value of low pollution discharge of automobiles that enjoy the reduced consumption tax policy. If they fail to meet the requirement, their qualification for the reduction of the consumption tax will be cancelled.

As for the vehicles whose qualification for the reduction of the consumption tax has been cancelled, the production enterprises may enjoy the policy for the reduction of the consumption tax after reapplication in accordance with the above inspection and approval procedures.

(4) If the inspection authorities are involved in falsification, their qualification for inspecting the vehicles with low pollution discharge shall be cancelled and they shall be punished by the relevant department of the State according to law.

(5) If the automobile production enterprises adopt illegal means to gain benefits of the policy of the State by cheating for the reduction of the consumption tax, once the enterprises are found out after a thorough investigation, the competent tax authorities shall, in accordance with the Law of the People's Republic of China on the Management of Tax Collection and relevant provisions of relevant rules and regulations, recover the reduced tax amount and punish them.     

6. The Circular  shall go into effect from January 1, 2000.