October 2002

Pursuant to this Official Letter, an enterprise losing invoices, which have been issued but not yet been delivered to the customers, is required to prepared the following documents to submit to the tax authority:

• An explanatory statement on the loss of the invoice, which specifies the date of issue of the invoice, name of purchaser, name of goods and the sale price; 
• Copy of the first copy of the invoice; and
• Confirmation of the tax authority with jurisdiction over the seller and purchaser that the seller has paid value added tax and the purchaser has recorded the purchase of goods in his accounting books.

The enterprise losing the invoice will be fined. Meanwhile, the purchaser may use the above documents, replacing the lost invoices with the copies, for declaration of value added tax and corporate income tax.

Under this Official Letter, where foreign invested enterprises, and enterprises established under the Enterprise Law, pay salaries and allowances to their employees in accordance with the salary scales and allowance scales applicable to State Owned Enterprises, position allowances are not subject to personal income tax.
Where these enterprises pay salaries and allowances to their employees based on their own salary and allowance scales, position allowances are subject to personal income tax.

According to this Official Letter, where an enterprise purchases fixed assets to use for production of goods and provision of services both subject to value added tax and not subject to value added tax, the enterprise may only deduct the amount of input value added tax of the fixed assets used for the production of goods and provision of services subject to value added tax.
Where the enterprise fails to separate the amount of input value added tax of the fixed assets used for production of goods and provision of services subject to value added tax, the amount of input value added tax of the fixed assets shall be deducted in accordance with the percentage of the turnover earned from goods and services subject to value added tax to enterprise's total turnover.
The amount of input value added tax that has not been deducted will be added to the value of fixed assets for annual depreciation. 

Under this Official Letter, where an enterprise enjoys exemption from and/or reduction of corporate income tax, but during the procedures of finalisation of tax, the tax authority discovers that some expenses are not supported by valid invoices, which will result in an increase of the taxable income, this enterprise shall still enjoy the exemption from and/or reduction of corporate income tax for the discovered amount. However, the enterprise may be fined for the false declaration.

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