WORLD TRADE  
ORGANIZATION  WT/DS358/1 
G/L/813 
G/SCM/D74/1 G/TRIMS/D/25 
7 February 2007 
 
(07-0520) 
 Original:   English 
 
 
 
CHINA – CERTAIN MEASURES GRANTING REFUNDS, REDUCTIONS OR 
EXEMPTIONS FROM TAXES AND OTHER PAYMENTS 
 
Request for Consultations by the United States  
 
 
 The following communication, dated 2 Februa ry 2007, from the delegation of the United 
States to the delegation of China and to the Chairman  of the Dispute Settlement Body, is circulated in 
accordance with Article 4.4 of the DSU. 
 
_______________ 
 
  My authorities have instructed me to request  consultations with the Government of the 
People's Republic of China pursuant to Articles 1 and 4 of the Understanding on Rules and 
Procedures Governing the Settlement of Disputes , 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"), with regard to certain measures granting refunds, 
reductions, or exemptions from ta xes or other payments otherwise due to the government by 
enterprises in China.  As required by Article 4.2 of the SCM Agreement, a Statement of Available 
Evidence is attached to this  request for consultations. 
  These measures include the following, as well as any amendments and any related or 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 fo r Business Income Tax for Homemade 
Equipment Purchased by Enterprise s with Foreign Investment and Foreign 
Enterprises ,2 read in conjunction with Circular of the State Administration of 
Taxation on Printing and Distributing th e Measures Concerning Business Income 
Tax Credit on the Investment of Enterprises with Foreign Investment and Foreign 
Enterprises by Way of Purchasing Homemade Equipment ;3  
 
                                                      
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. WT/DS358/1, G/L/813,  
G/SCM/D74/1, G/TRIMS/D/25 Page 2 
 
 
  • Circular on Distribution of Interim Measures Concerning Reduction and Exemption 
of Enterprise Income Tax for Investment in Domestically Made Equipment for 
Technological Renovation ;
4 
 
• Articles 75(7) and 75(8) of the Rules for Implementation of the Income Tax Law of 
the People's Republic of China on Enterp rises with Foreign Investment and Foreign 
Enterprises ,5 read in conjunction with Articles 8 and 9 of the Provisions of the State 
Council on the Encouragement of Foreign Investment6 and Articles 6 and 8 of the 
Income Tax Law of the People's Republic  of China on Enterprises with Foreign 
Investment and Foreign Enterprises ;7  
 
• Article 73(6) of the Rules for Implementation of the Income Tax Law of the People's 
Republic of China on Enterprises with Foreign Investment and Foreign Enterprises ,8 
read in conjunction with Articles 6 and 7 of the Income Tax Law of the People's 
Republic of China on Enterprises with Foreign Investment and Foreign Enterprises9 
and Section XIII of the Catalogue for the Guidance of Foreign Investment 
Industries ;10 
 
• Article 81 of the Rules for Implementation of the Income Tax Law of the People's 
Republic of China on Enterprises with Foreign Investment and Foreign Enterprises ,11 
read in conjunction with Articles 6 and 10 of the Income Tax Law of the People's 
Republic of China on Enterprises with  Foreign Investment and Foreign Enterprises12 
and Article 10 of the Provisions of the State Council on the Encouragement of 
Foreign Investment ;13 
 
• Article 3 of the Provisions of the State Council on the Encouragement of Foreign 
Investment ;14 
 
• Articles 3 and 6 of 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 Ex port Collections of Foreign Exchange ;15 
                                                      
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. 
7 Order [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. 
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 GuoFa [1986] No. 95 (11 October 1986), available at www.fdi.gov.cn. 
15 YinFa [2000] No. 58 (17 February 2000), available at www.fdi.gov.cn.  WT/DS358/1, G/L/813,  
 G/SCM/D74/1, G/TRIMS/D/25  Page 3 
 
 
  • Circular of the State Council Concerning th e Adjustment in the Taxation Policy of 
Imported Equipment ,
16 read in conjunction with Section XIII of the Catalogue for the 
Guidance of Foreign Investment Industries .17 
 
 These measures appear to provide such refunds , reductions or exemptions to enterprises in 
China on the condition that those enterprises purchase domestic over imported goods, or on the 
condition that those enterprises meet certain export pe rformance criteria.  Accordingly, the measures 
appear to be inconsistent with Article 3 of the SCM Agreement.  Furthermore, to the extent the 
measures accord imported products treatment less favorable 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 appear not to co mply with China's obligations under paragraphs 
7.2-7.3 and 10.3 of Part I of its Accession Protocol18, as well as paragraph 1.2 of Part I of its 
Accession Protocol (to the extent that it incorporat es 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 th e present request and to fixing a mutually 
convenient date for consultations.  
                                                     
 
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/DS358/1, G/L/813,  
G/SCM/D74/1, G/TRIMS/D/25 Page 4 
 
 
  Statement of Available Evidence
 
 
 
• 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
20 
 
• Circular of the Ministry of Finance and the State Administration of Taxation 
Concerning the Issue of Tax Credit fo r Business Income Tax for Homemade 
Equipment Purchased by Enterprise s with Foreign 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 Ta x Law of the People's Republic of China 
on Enterprises with Foreign Investment and Foreign Enterprises26 
 
• 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 Pr inting and Distribution Detailed Rules on 
Rewarding and Punishment Concerning Prov isional Regulations over Examination of 
Export Collections of Foreign Exchange
27 
                                                      
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 Co mmerce 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 YinFa [2000] No. 58 (17 February 2000), available at www.fdi.gov.cn  (English translation by 
Ministry of Commerce of People's Republic of China).  WT/DS358/1, G/L/813,  
 G/SCM/D74/1, G/TRIMS/D/25  Page 5 
 
 
  • Circular of the State Council Concerning th e Adjustment in the Taxation Policy of 
Imported Equipment
28 
 
• Catalogue for the Guidance of Foreign Investment Industries29 
 
__________ 
 
 
                                                      
28 GuoFa [1997] No. 37 (29 December 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).