WORLD TRADE  
ORGANIZATION  WT/DS359/1/Add.1 
G/L/814/Add.1 
G/SCM/D75/1/Add.1 G/TRIMS/D/26/Add.1 
9 May 2007 
 
 
(07-1922) 
 Original:   Spanish 
 
  
CHINA – CERTAIN MEASURES GRANTING REFUNDS, 
REDUCTIONS OR EXEMPTIONS FROM TAXES 
AND OTHER PAYMENTS 
 
Request for Further Consultations by Mexico
 
 
Addendum  
 
 
 The following communication, dated 4 May 20 07, from the delegation of Mexico to the 
delegation of China and to the Chairman of the Dis pute Settlement Body, is ci rculated in accordance 
with Article 4.4 of the DSU.  
_______________ 
 
  As you know, on 20 March 2007, pursuant to th e request by Mexico (DS359/1), the People's 
Republic of China and Mexico held consultations  regarding certain measures through which the 
People's Republic of China grants enterprises locat ed within its territory refunds, reductions, or 
exemptions from taxes or other payments otherwis e due to the Government. On the basis of those 
consultations, held pursuant to Articles 1 and 4 of the Understanding on Rules and Procedures 
Governing the Settlement of Disputes  (DSU), Article XXII:1 of the General Agreement on Tariffs and 
Trade 1994  (GATT 1994), Articles 4 and 30 of the Agreement on Subsidies and Countervailing 
Measures  (SCM Agreement), and Article 8 of the Agreement on Trade-Related Investment Measures 
(TRIMs Agreement), and following a subsequent re view, we understand that China has repealed a 
subsidy program based on the disbursement of lo ans at discounted lending rates, identified in our 
initial consultation request as the Circular of the People's Bank of China, the State Administration of 
Foreign Exchange, the Ministry of Foreign Trade  and Economic Cooperation and the State 
Administration of Taxation Concerning Printing and  Distribution Detailed Rules on Rewarding and 
Punishment Concerning Provisional  Regulations over Examination of Export Collections of Foreign 
Exchange . 
  In addition, regarding the Income Tax Law of the People's Re public of China on Enterprises 
with Foreign Investment and Foreign Enterprises , also identified in our initial consultation request, 
we have learned that China recently adopted a new income tax law, the Enterprise Income Tax Law of 
the People's Republic of China . 
  To take these developments into account, my authorities have instructed me to modify our 
identification of the measures at issue and request supplemental consultations with the Government of 
the People's Republic of China pursuant to Articles 1 and 4 of the  DSU, Article XXII:1 of the GATT 
1994, Articles 4 and 30 of the SCM Agreement, and Article 8 of the TRIMs Agreement, regarding 
certain measures through which the People's Republic of China grants enterp rises located within its WT/DS359/1/Add.1, G/L/814/Add.1,  
G/SCM/D75/1/Add.1, G/TRIMS/D/26/Add.1 Page 2 
 
 
  territory refunds, reductions, or exemptions from taxes or other payments otherwise due to the 
Government.  As required by Article 4.2 of the SC M Agreement, a Statement of Available Evidence 
is attached to this request for supplemental consultations.  
 The measures concerned include the following,  as well as any amendments thereto and any 
related implementing measures: 
• Circular of the State Administration of Taxation Concerning Transmitting the Interim 
Measure for the Administration of Tax Refunds to Enterprises with Foreign Investment for Their Domestic Equipment Purchases
1; 
• Circular of the Ministry of Finance and the State Administration of Taxation 
Concerning the Issue of Tax Credit for Business Income Tax for Homemade 
Equipment Purchased by Enterprises w ith Foreign Investment and Foreign 
Enterprises2, read in conjunction with Circular of the State Administration of Taxation 
on Printing and Distributing the Measures Concerning Business Income Tax Credit on the Investment of Enterprises with Forei gn Investment and Foreign Enterprises by Way 
of Purchasing Homemade Equipment
3; 
• Circular on Distribution of Interim Measures Concerning Reduction and Exemption of 
Enterprise Income Tax for Investment in  Domestically Made Equipment for 
Technological Renovation4; 
• Rules for Implementation of the Income Tax Law of the People's Republic of China on 
Enterprises with Foreign Investment and Foreign Enterprises5, including paragraphs 7, 
8 and 9 of Article 75 thereof, read in conjunction with the Provisions of the State 
Council on the Encouragement of Foreign Investment6, including and Articles 8, 9 and 
18 thereof, and the Income Tax Law of the People's Re public of China on Enterprises 
with Foreign Investment and Foreign Enterprises7, including Articles 2, 5, 6 and 8 
thereof; 
• Rules for Implementation of the Income Tax Law of the People's Republic of China on 
Enterprises with Foreign Investment and Foreign Enterprises8, including Article 73(6) 
thereof, read in conjunction with the Income Tax Law of the People's Republic of China 
on Enterprises with Foreign Investment and Foreign Enterprises9, including Articles 2, 
5, 6 and 7 thereof, and Section XIII of the Catalogue for the Guidance of Foreign 
Investment Industries10; 
                                                      
1 GuoShiFa [1999] No. 171 (20 August 1999), available at www.fdi.gov.cn.  
2 CaiShuiZi [2000] No. 49 (14 January 2000), available at www.fdi.gov.cn.  
3 GuoShuiFa [2000] No. 90 (18 May 2000), available at www.fdi.gov.cn.  
4 CaiShui [1999] No. 290 (8 December 1999).  
5 Decree [1991] No. 85 of the State Council (30 June 1991), available at www.fdi.gov.cn.  
6 GuoFa [1986] No. 95 (11 October 1986), available at www.fdi.gov.cn.  
7Order [1991] No. 45 of the President of the People 's Republic of China (9 April 1991), available at 
www.fdi.gov.cn.  
8 Decree [1991] No. 85 of the State Council (30 June 1991), available at www.fdi.gov.cn.  
9 Order [1991] No. 45 of the President of the People's Republic of China (9 April 1991), available at 
www.fdi.gov.cn.  
10 Order [2004] No. 24 of the State Development and Reform Commission, the Ministry of Commerce 
of the People's Republic of China (30 No vember 2004), availabl e at www.fdi.gov.cn.   WT/DS359/1/Add.1, G/L/814/Add.1,  
 G/SCM/D75/1/Add.1, G/TRIMS/D/26/Add.1  Page 3 
 
 
  • Rules for Implementation of the Income Tax Law of the People's Republic of China on 
Enterprises with Foreign Investment and Foreign Enterprises
11, including Article 81 
thereof, read in conjunction with the Income Tax Law of the People's Republic of China 
on Enterprises with Foreign Investment and Foreign Enterprises12, including Articles 6 
and 10 thereof, and the Provisions of the State C ouncil on the Encouragement of 
Foreign Investment13, including Article 10 thereof; 
• The Enterprise Income Tax Law of the People's Republic of China , including Parts IV 
and VIII thereof14; 
• The Provisions of the State Council on th e Encouragement of Foreign Investment15, 
including Article 3 thereof; 
• Circular of the State Council Concerning th e Adjustment in the Taxation Policy of 
Imported Equipment16, read in conjunction w ith Section XIII of the Catalogue for the 
Guidance of Foreign Investment Industries .17 
  These measures appear to provide refunds, reduc tions or exemptions to enterprises in China 
on the condition that those enterprises purchase domestic over imported goods, or on the condition 
that they meet certain export performance criteria.  Thus, the said measures appear to be inconsistent 
with Article 3 of the SCM Agreement .  Furthermore, to the extent the measures accord imported 
products treatment less favourable than that accorded "like" domestic products, they appear 
inconsistent with Article III:4 of the GATT 1994  and Article 2 of the TRIMs Agreement. The 
measures also include preferential treatment for enterprises with foreign investment and foreign 
enterprises established in economic areas in the terri tory of China (for example, in special economic 
zones, economic and technological zones, coastal  economic open zones, and the Hainan Special 
Economic Zone) to the extent that they grant enterprises located within the said areas refunds, 
reductions, or exemptions from taxes or other paym ents in a manner inconsistent with the above-
mentioned WTO provisions.  Finally, the measures also  appear not to comply with China's obligations 
under paragraphs 7.2-7.3 and 10.3 of Part I of its WTO Accession Protocol
18, as well as paragraph 1.2 
of Part I of its Accession Protocol (to the extent  that it incorporates paragraphs 167 and 203 of the 
Report of the Working Party on the Accession of China19), which forms part of the terms of accession 
agreed between China and the WTO and is an integral part of the Marrakesh Agreement Establishing 
the World Trade Organization . 
  We  look forward to receiving your reply to the present request in order to fix a mutually 
convenient date for consultations. 
 
                                                     
 
11 Decree [1991] of the State Council (30 June 1991), available at www.fdi.gov.cn.  
12 Order [1991] No. 45 of the President of the People's Republic of China (9 April 1991), available at 
www.fdi.gov.cn. 
13 GuoFa [1986] No. 95 (11 October 1986), available at www.fdi.gov.cn.  
14 Order [2007] No. 63 of the President of the People's Republic of China (16 March 2007), available at 
www.fdi.gov.cn.  
15 GuoFa [1986] No. 95 (11 October 1986), available at www.fdi.gov.cn.  
16 GuoFa [1997] No. 37 (29 December 1997), available at www.fdi.gov.cn.  
17 Order [2004] No. 24 of the State Development and Reform Commission, the Ministry of Commerce 
of the People's Republic of China (30 No vember 2004), availabl e at www.fdi.gov.cn.  
18 WT/L/432. 
19 WT/MIN(01)/3.  WT/DS359/1/Add.1, G/L/814/Add.1,  
G/SCM/D75/1/Add.1, G/TRIMS/D/26/Add.1 Page 4 
 
 
  Statement of Available Evidence
 
  
• Circular of the State Administration of Taxation Concerning Transmitting the Interim 
Measure for the Administration of Tax Ref unds to Enterprises with Foreign Investment 
for their Domestic Equipment Purchases
20; 
• Circular of the Ministry of Finance and the State Administration of Taxation 
Concerning the Issue of Tax Credit for Business Income Ta x for Homemade Equipment 
Purchased by Enterprises with Forei gn Investment and Foreign Enterprises21; 
• Circular of the State Administration of Taxation on Printing and Distributing the 
Measures Concerning Business Income Tax Credit on the Investment of Enterprises 
with Foreign Investment and Foreign Enterp rises by Way of Purchasing Homemade 
Equipment22; 
• Circular on Distribution of Interim Measures Concerning Reduction and Exemption of 
Enterprise Income Tax for Investment in  Domestically Made Equipment for 
Technological Renovation23; 
• Provisions of the State Council on the Encouragement of Foreign Investment24; 
• Income Tax Law of the People's Republic of China on Enterprises with Foreign 
Investment and Foreign Enterprises25; 
• Rules for Implementation of the Income Tax Law of the People's Republic of China on 
Enterprises with Foreign Investment and Foreign Enterprises26; 
• Enterprise Income Tax Law of th e People's Republic of China27; 
• Circular of the State Council Concerning th e Adjustment in the Taxation Policy of 
Imported Equipment28; 
• Catalogue for the Guidance of Foreign Investment Industries.29 
 
__________ 
                                                      
20 GuoShiFa [1999] No. 171 (20 August 1999), available at www.fdi.gov.cn (English translation by 
Ministry of Commerce of People's Republic of China).  
21 CaiShuiZi [2000] No. 49 (14 January 2000), available at www.fdi.gov.cn (English translation by 
Ministry of Commerce of People's Republic of China).  
22 GuoShuiFa [2000] No. 90 (18 May 2000), available at www.fdi.gov.cn (English translation by 
Ministry of Commerce of People's Republic of China).  
23 CaiShui [1999] No. 290 (8 December 1999) (English translation).  
24 GuoFa [1986] No. 95 (11 October 1986), available at www.fdi.gov.cn (English translation by 
Ministry of Commerce of People's Republic of China).  
25 Order [1991] No. 45 of the President of the People's Republic of China (9 April 1991), available at 
www.fdi.gov.cn (English translation by Ministry of Commerce of People's Republic of China).  
26 Decree [1991] No. 85 of the State Council (30 June 1991), available at www.fdi.gov.cn (English 
translation by Ministry of Commerce of People's Republic of China).  
27 Order [2007] No. 63 of the President of the People's Republic of China (16 March 2007), available at 
www.fdi.gov.cn. (English translation by Ministry of Commerce of People's Republic of China).  
28 GuoFa [1997] No. 37 (29 Decem ber 1997), available at www.fdi. gov.cn (English translation by 
Ministry of Commerce of People's Republic of China).  
29 Order [2004] No. 24 of the State Development and Reform Commission, the Ministry of Commerce 
of the People's Republic of China (30 November 2004), available at www.fdi.gov.cn (English translation by 
Ministry of Commerce of People's Republic of China).