The finance departments (bureaus), the offices of the State Administration of Taxation and the local taxation bureaus of all provinces, autonomous regions, municipalities directly under the Central Government and cities specifically designated in the State plan and the finance bureau of Xinjiang Production and Construction Corps,

In accordance with relevant provisions of the Circular of the State Council on Releasing the Overall Plan for China (Shanghai) Pilot Free Trade Zone (Guo Fa [2013] No.38), the policies on enterprise tax income on appreciation of assets evaluation arising from investment with non-monetary assets in China (Shanghai) Pilot Free Trade Zone (hereinafter referred as to the "Zone") are hereby notified as follows:

Article 1Enterprises registered in the Zone may evenly include the income gained by transferring non-monetary assets recognized according to the appreciation of asset evaluation arising from assets restructuring such as external investment with non-monetary assets into taxable income by phases within five years for the purpose of calculating and paying enterprise income tax as required.

Article 2Where an enterprise engages in external investment with its non-monetary assets, after the investment agreement comes into force, and the actual delivery of assets and the handling of equity registration are completed, the income gained by transferring the aforementioned non-monetary assets will be recognized.

Where an enterprise engages in external investment with its non-monetary assets, the non-monetary assets shall be evaluated, and the income gained by transferring the aforementioned non-monetary assets shall be calculated and recognized according to the balance of the fair value after evaluation net of tax base.

Article 3Where an enterprise engages in external investment with its non-monetary assets, the tax base for shares acquired shall base on the original tax base for non-monetary assets plus income gained by transferring the non-monetary assets recorded annually; such tax base shall be subject to adjustments year by year.

The tax base for the non-monetary assets acquired by investee shall be recognized at fair value of the non-monetary assets.

Article 4Where an enterprise transfers the aforementioned equity or withdraws the external investments within five years, it shall stop implementing tax-deferred policies and, at the time of annual final settlement of enterprise income tax for the current year of transferring the equity or withdrawing the investments, include the unrecognized income gained by transferring non-monetary assets within the deferred period for the purpose of calculating the enterprise income tax, which shall be paid on a lump-sum basis; when an enterprise calculates the income from the transfer of equity, the tax base for the equity may be adjusted well at once in accordance with the Paragraph 1 of Article 3 of the Circular of Ministry of Finance and State Administration of Taxation on Issues Concerning Policies on Enterprise Income Tax Involved in External Investment with Non-monetary Assets and Other Assets Restructuring from Enterprises Registered within the China (Shanghai) Pilot Free Trade Zone (hereinafter referred to as the "Circular").

Where an enterprise cancels within five years as of external investments, it shall stop implementing the tax-deferred policies and, at the time of annual final settlement of enterprise income tax for the year of business discontinuation, include the unrecognized income gained by transferring non-monetary assets within the deferred period for the purpose of calculating enterprise income tax, which shall be paid on a lump-sum basis.

Article 5Enterprises shall handle tax-deferred filing and registration at the competent tax authorities with relevant materials provided within 30 days as of the date on which the investment agreement comes into force and the actual delivery of asset takes place and the equity registration is dealt with.

The competent tax authorities shall review the materials submitted and notify the enterprises of the results of filing and registration within the required time.

Article 6Enterprises shall, in the year in which the income is recognized, keep the corresponding accounts for each item, correctly record the income gained by transferring non-monetary assets that shall be recognized, and, at the time of final settlement of enterprise income tax for the corresponding year, make an explanation on the recognized amounts of the current year and amounts carried forward by year.

The competent tax authorities shall systematically manage relevant information and compare the application information with filing information while notifying the enterprises of the results of filing and registration.

Article 7The competent authorities shall, at the time of organizing and carrying out the follow-up management of final settlement of enterprise income tax, incorporate the implementation of enterprises deferred taxes into follow-up management system, and properly carry out management via the tax payment service reminding platform or the risk monitoring platform subject to the degree of risk.

Article 8For the purpose of the Circular, enterprises registered within the Zone refer to the resident enterprises registering and operating within the Zone and conducting the account check system.

For the purpose of the Circular, assets restructuring such as external investment with non-monetary assets refer to establishment and investment in companies (limited to the new companies established with non-monetary assets) and equity acquisition and asset acquisition in compliance with Article 1 of the Circular of the Ministry of Finance and State Administration of Taxation on Issues Concerning Treatment of Enterprise Income Tax in Enterprise Restructuring Business (Cai Shui [2009] No.59).

Article 9The Circular shall take effect as of the date of issuance.

Ministry of Finance

State Administration of Taxation

November 15, 2013