CHINA – CERTAIN MEASURES GRANTING REFUNDS, REDUCTIONS OR EXEMPTIONS FROM TAXES AND OTHER PAYMENTS
Document: Request for Consultations by Mexico
Date: 28 February 2007
Document codes: WT/DS359/1; G/L/814; G/SCM/D75/1; G/TRIMS/D/26
Complainant: Mexico
Respondent: China
Third parties: Argentina, Australia, Canada, Chile, Colombia, Egypt, EU, Japan, Taiwan
Dispute stage: Mutually Agreed Solution
Agreements cited: Part I, para. 1.2, Part I, para. 7.2, Part I, para. 7.3, Part I, para. 10.3  Protocol of AccessionArt. 3.1(b), 3.2  Subsidies and Countervailing Measures (SCM)Art. III:4  GATT 1994Art. 2.1, Annex 1  Trade-Related Investment Measures (TRIMs)

CHINA – CERTAIN MEASURES GRANTING REFUNDS, REDUCTIONS OR
EXEMPTIONS FROM TAXES AND OTHER PAYMENTS

Request for Consultations by Mexico

 The following communication, dated 26 February 2007, 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.

 The Government of Mexico hereby requests consultations with the Government of the
People's Republic of China ("PRC") 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 re gard to certain measures through which the PRC
grants enterprises refunds, reductions, or exemptions from taxes or other payments otherwise due to
the Government. As required by Article 4.2 of the SCM Agreement, I attach to this request for
consultations a statement of available evidence.

 The measures that are the subject of this re quest include the following and any amendments
thereto, as well as 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 for Business Income Tax for Homemade
Equipment Purchased by Enterprise with 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 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/DS359/1, G/L/814,
G/SCM/D75/1, G/TRIMS/D/26

• 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 Enterprises with Foreign Investment and Foreign
Enterprises5, read in conjunction with Articles 8 and 9 of the Provisions of the State
Council on the Encouragement of Foreign Investment 6 and Articles 6 and 8 of the
Income Tax Law of the People's Republic of China on Enterprises with Foreign
Investment and Foreign Enterprises7;
• 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 Enterprises 9
and Section XIII of the Catalogue for the Guidance of Foreign Investment
Industries10;
• 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 Enterprises 12
and Article 10 of the Provisions of the State C ouncil on the Encouragement of
Foreign Investment13;
• Article 3 of the Provisions of the State Council on the Encouragement of Foreign
Investment14;
• 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
Distributing Detailed Rules on Rewarding and Punishment Concerning Provisional
Regulations over Examination of Export Collections of Foreign Exchange15;

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 November 2004), available 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 Peopl e'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 wvvw.fdi.gov.cn.
15 YinFa [2000] No. 58 (17 February 2000), available at www.fdi.gov.cn.
WT/DS359/1, G/L/814,
 G/SCM/D75/1, G/TRIMS/D/26

• 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 refunds, re ductions or exemptions from taxes or other
payments ordinarily payable to the Government by enterprises in the PRC on the condition that those
enterprises purchase domestic over imported goods, or on the condition that those enterprises meet
certain export performance criteria. Accordingl y, Mexico considers that these measures are
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 are
inconsistent with Article III:4 of the GATT 1994 and Article 2 of the TRIMs Agreement. In Mexico's
view, the measures are also inconsistent with the PRC'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 incorporates paragraphs 167 and 203 of the Report of the Working Party on the
Accession of China 19), 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.

 Mexico reserves the right to raise further f actual and legal claims during the course of the
consultations. It looks forward to receiving the PRC Government's response in order to set 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 November 2004), available at www.fdi.gov.cn.
18 WT/L/432.
19 WT/MIN(01)/3.
WT/DS359/1, G/L/814,
G/SCM/D75/1, G/TRIMS/D/26

Statement of Available Evidence Pursuant to Article 4.2
of the SCM Agreement

• 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 for 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 Ent erprises 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;
• 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 Distributing Detailed Rules on
Rewarding and Punishment Concerning Provisional Regulations over Examination of
Export Collections of Foreign Exchange
27;
• Circular of the State Council Concerning th e Adjustment in the Taxation Policy of
Imported Equipment28;

20 GuoShiFa [1999] No. 171 (20 August 1999), available at www.fdi.gov.cn.
21 CaiShuiZi [2000] No. 49 (14 January 2000), available at www.fdi.gov.cn.
22 GuoShuiFa [2000] No. 90 (18 May 2000), available at www.fdi.gov.cn.
23 CaiShui [1999] No. 290 (8 December 1999).
24 GuoFa [1986] No. 95 (11 October 1986), available at www.fdi.gov.cn.
25 Order [1991] No. 45 of the President of the Peopl e's Republic of China (9 April 1991), available at
www.fdi.gov.cn.
26 Decree [1991] No. 85 of the State Council (30 June 1991), available at www.fdi.gov.cn.
27 YinFa[2000] No. 58 (17 February 2000), available at www.fdi.gov.cn.
28 GuoFa [1997] No. 37 (29 December 1997), available at wvw.fdi.gov.cn.
WT/DS359/1, G/L/814,
 G/SCM/D75/1, G/TRIMS/D/26

• Catalogue for the Guidance of Foreign Investment Industries.
29