Attachment 3 Electricity schedule of Jiangsu Province Unit: Yuan/KWH Classification Rate Basic rate Less than 1KV 1-10 KV Less than 20-35KV Less than 35-110KV 110KV More than 220KV (including 220 KV) Maximum demand (Yuan/KW. Month) Transformer capacity (Yuan/KVA. Month) I. Resi denti al elect ricity pr og res siv e pri ce Annual usage≤2760KWH 0.5283 0.5183 2760KWH<Annual usage≤4800KWH 0.5783 0.5683 Annual usage >4800KWH 0.8283 0.8183 Other residential electricity 0.5483 0.5383 II. General commercial and industrial electricity 0.8751 0.8601 0.8541 0.8451 Including:1.Restrictive high energy consumption electricity 0.9751 0.9601 0.9541 0.9451 2.Eliminative high energy consumption electricity 1.1751 1.1601 1.1541 1.1451 III. Large industrial electricity 0.6601 0.6541 0.6451 0.6301 0.6151 40 30 Including:1. Limited high energy consumption electricity 0.7601 0.7541 0.7451 0.7301 0.7151 40 30 2.Eliminative high energy consumption electricity 0.9601 0.9541 0.9451 0.9301 0.9151 40 30 PUBLIC RECORD RECEIVED 12/04/2016
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Attachment 3 Electricity schedule of Jiangsu Province...Attachment 3 Electricity schedule of Jiangsu Province Unit: Yuan/KWH Classification RateBasic rate Less than 1KV 1-10 KV Less
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Attachment 3 Electricity schedule of Jiangsu Province
Unit: Yuan/KWH
Classification
Rate Basic rate
Less than 1KV 1-10 KV Less than
20-35KV Less than 35-110KV
110KV
More than 220KV
(including 220 KV)
Maximum demand
(Yuan/KW. Month)
Transformer capacity
(Yuan/KVA.Month)
I. Residenti
al electricity
progressive
price
Annual usage≤2760KWH 0.5283 0.5183
2760KWH<Annual usage≤4800KWH 0.5783 0.5683
Annual usage >4800KWH 0.8283 0.8183
Other residential electricity 0.5483 0.5383
II. General commercial and industrialelectricity 0.8751 0.8601 0.8541 0.8451
Including:1.Restrictive high energy consumption electricity 0.9751 0.9601 0.9541 0.9451
2.Eliminative high energy consumption electricity 1.1751 1.1601 1.1541 1.1451
III. Large industrial electricity 0.6601 0.6541 0.6451 0.6301 0.6151 40 30
Including:1. Limited high energy consumption electricity 0.7601 0.7541 0.7451 0.7301 0.7151 40 30
2.Eliminative high energy consumption electricity 0.9601 0.9541 0.9451 0.9301 0.9151 40 30
PUBLIC RECORD RECEIVED 12/04/2016
IV. Agricultural electricity 0.5090 0.4990 0.4930 0.4840
Note: 1. The price listed in the above table include major water conservancy construction fund. The specific standard is as follows: The electricity for production and
residential of medium and small fertilizer producers is 0.3 Fen, electricity for others is 1.491 Fen. Except the agriculture electricity, the electricity for others
includes the national large and medium-sized reservoirs immigration support fund 0.83 Fen and local small reservoirs immigration support fund 0.05 Fen.
2. Except the agriculture production electricity and agriculture residential electricity, the price listed in the above the table include the additional urban public
utilities. The specific standard is as follows: the electricity for the residential in towns is 3 Fen and electricity for others is 0.6 Fen. The additional for large
industrial electricity, general commercial and industrial electricity and others is 1.5 Fen for renewable energy.
3. Punitive electricity standard: If the unit consumption is higher than twice of the limit standard, it shall be implemented based on eliminative high energy
consumption electricity. If the unit consumption is less than twice of the limit standard, it shall be implemented based on restrictive high energy consumption
electricity
4. For non-residential users using residential electricity specified by the state, it shall be implemented according to the price for other residential electricity.
5. For low income family in towns and five guarantees family in village, 15 kilowatt hour shall be granted for free and the electricity price is zero.
6. The electricity preference for fertilizer producers shall be cancelled by two steps. Since April 20, 2015, the price shall be decreased to 0.1 Yuan compared to
the commercial and industrial electricity in the same type. Since April 20, 2016, the preference for fertilizer producers shall be cancelled and shall be
implemented according to the commercial and industrial electricity in the same type.
Attachment 4:
Electricity Schedule by peak and valley for industrial
< Actively expanding non-steel businesses and making a new progress, Baosight established wireless network for 22 Wanda Plazas> Baosteel built mobile learning " handheld class", made opportune use of "fragmented" time and took the subway to learn ...
简体中文
Baosteel News Corporate Publications Corporate Video
On December 7, Baosteel Co., Ltd made an announcement, announcing it successfully issued $500 million foreign bonds. The issuance of dollar bonds was the first time for Baosteel Co., Ltd to use a wholly owned overseas subsidiary Bao-Trans Enterprise as the main body to issue bonds directly and adopted the liquid supporting commitment provided by Baosteel Co., Ltd together with concurrent innovative trading structure of maintaining a good agreement.
On November 29, Baosteel Co., Ltd started to issue overseas dollar bonds. For this transaction, three big international credit rating agencies including Standard & Poor's, Moddy's and Fitch rating respectively granted Baosteel Co., Ltd an A-, A3 and A- long-term credit rating, with a stable outlook. Besides, it granted the planned issuing dollar bonds of Bao-Trans Enterprise an A-, Baa1 and A- rating, fully reflecting the recognition and affirmation of international credit rating agencies on Baosteel Co., Ltd and the trading structure.
For the overseas issuance of dollar bonds, the management level of Baosteel Co., Ltd had the road shows in Singapore and Hong Kong respectively on December 2 and December 3. After two-day fruitful road shows, the representatives from nearly 90 international famous investment institutions were met. During the process of interacting with investors, management level of Baosteel Co., Ltd elaborately explained the innovative trading structure, company's highlighted credits and the planning of Zhanjiang Iron & Steel Base project, which expounded the perception of Baosteel Co., Ltd on the future trends of Chinese iron and steel industry as well as the medium and long-term development strategies of Baosteel Co., Ltd.
The bond trades triggered the strong responses from 136 global professional investment institutions, aggregately receiving $2.2 billion orders. Among them, Asian investors accounted for 85%, and European investors took up 15%. In terms of different types of investors, fund companies accounted for 65%, central banks and insurance companies occupied 16%, banks took up 16% and private banks accounted for 3%.
Finally, Baosteel Co., Ltd successfully issued $500 million and five-year debenture bonds with 3.75% coupon, maturity time being December 12, 2018 and paying interests on a semi-annual basis. Innovative trading patterns and methods of promoting credits not only enabled Bao-Trans Enterprise gain the similar credit rating with Baosteel Co., Ltd, but also ultimately significantly lowered the costs of issuing bonds compared with general modes of maintaining good agreements, achieving a great success. It is known that bonds will be listed on Hong Kong Stock Exchange.
Interim Measures for the Administration of Comprehensive Performance Evaluation of Central
Enterprises
Order of the State-owned Assets Supervision and Administration Commission of the State Council
(No.14)
The Interim Measures for the Administration of Comprehensive Performance Evaluation of
Central Enterprises, which were adopted through discussion at the 38th executive meeting of the
director of State-owned Assets Supervision and Administration Commission of the State Council,
are hereby promulgated, and shall come into force as of May 7, 2006.
Director of the State-owned Assets Supervision and Administration Commission of the State
Council: Li Rongrong
April 7, 2006
Interim Measures for the Administration of Comprehensive Performance Evaluation of Central
Enterprises
Chapter I General Provisions
Article 1 With a view to strengthening financial supervision over the enterprises (hereinafter
referred to as enterprises)whose investment contribution duties are preformed by the
State-owned Assets Supervision and Administration Commission of the State Council (hereinafter
referred to as the SASAC), regulating the work for comprehensive performance evaluation of
enterprises, and comprehensively reflecting the operating quality of enterprise assets, promoting
to improve the level of capital returns, and correctly guiding the operation acts of enterprises, the
present Measures are formulated in accordance with the Interim Regulations on the Supervision
and Administration of State-owned Assets of Enterprises and the relevant state provisions.
Article 2 Comprehensive Performance Evaluation, as mentioned in the present Measures, shall
refer to the comprehensive judgment on profit-earning abilities of an enterprise in special
operation period, on assets quality, risk of debts, operation increase, and management conditions
thereof by the basic method of analysis on input and output and through establishing a
comprehensive evaluation index system, and comparing corresponding industrial evaluation
standard.
Article 3 The comprehensive performance evaluation on enterprises shall include tenure
performance evaluation and annual performance evaluation upon the need of audit on economic
liability and financial supervision work.
1. Tenure performance evaluation shall refer to the comprehensive judgment conducted on the
person in charge of an enterprise for his business achievement and management status during his
tenure.
2. Annual performance evaluation shall refer to the comprehensive judgment conducted on the
business achievement of an enterprise in a fiscal year.
Article 4 With a view to ensuring that the work for comprehensive performance evaluation be
objective, just, and fair, and effectively bringing into play the overall judgment, management
diagnosis, and behavior guide to enterprises, the work for comprehensive performance
evaluation shall be carried out on the basis of the financial statements audited by social
intermediary institutions.
As to any enterprise that does not make auditing by social intermediary institutions as required,
its work for comprehensive performance evaluation shall be carried out on the basis of the
financial statements audited by the internal auditing institution of the enterprise.
Article 5 The following principles shall be followed for carrying out the work for comprehensive
performance evaluation on enterprises:
1. Overall principle. Comprehensive performance evaluation on enterprises shall be conducted on
the various factors that may affect enterprise performance level by making multi-level and
multi-angle analysis and comprehensive judgment through establishing a comprehensive index
system.
2. Objectivity principle. Comprehensive performance evaluation on enterprises shall sufficiently
embody the characteristics of market competition environment, and judge the business
achievement and management status of the enterprises in an objective and just manner on the
basis of the domestic industrial standard or international industrial standard that are measured
uniformly in the same period.
3. Benefit principle. Comprehensive performance evaluation on enterprises shall focus on the
examination of the level of return on investment, and apply the basic method of analysis on input
and output, and truly reflect the assets operation efficiency of enterprises and capital
maintenance and appreciation.
4. Development principle. Comprehensive performance evaluation on enterprises shall, on the
basis of comprehensively reflecting the annual financial status and business achievements of
enterprises, objectively analyze the increase and development level of the enterprises among the
years, and predict the future development ability of the enterprises in a scientific way.
Article 6 The SASAC shall organize to carry out the work for comprehensive performance
evaluation on enterprises according to the present Measures, and make guidance and supervision
over the work for internal performance evaluation on enterprises.
Chapter II Contents of Evaluation and Evaluation Indexes
Article 7 Comprehensive performance evaluation on enterprises shall consist of two parts:
quantitive evaluation on financial performance and qualitative evaluation on management
performance.
Article 8 Quantitive evaluation on financial performance shall refer to quantitive comparative
analysis and judgment on profit-earning ability, assets quality, risk of debts, and business increase
of an enterprise in a certain period.
1. The analysis and judgment on profit-earning ability of an enterprise shall comprehensively
reflect the level of input and output of the enterprise and the profit earning-quality and cash
guarantee through capital and assets remuneration level, level of cost and expense control, and
operational cash flow status, and other financial indexes.
2. The analysis and judgment on assets quality of an enterprise shall comprehensively reflect the
efficiency of the use of economic resources possessed by the enterprise, assets management
level and the security of the assets of the enterprise through assets turnover, assets running
status, assets structure, and the efficiency of assets, and other financial indicators.
3. The analysis and judgment on the debt risk of an enterprise shall comprehensively reflect the
level of debts of the enterprise, solvency, and the debt risk faced by it through the level of debt
burden, structure of assets and liabilities, contingent liabilities, and cash solvency.
4. The analysis and judgment on the business increase of an enterprise shall comprehensively
reflect the business increase level and the strength for future development of the enterprise
through sales increase, capital accumulation, change of benefit, technical input, and other
financial indexes.
Article 9 The quantitive evaluation indexes of financial performance shall be divided into basic
index and modified index according to the functions and roles of the various indexes.
1. Basic index reflects the major aspects of financial performance of an enterprise in a certain
period, and draws a conclusion of the quantitive evaluation on financial performance of the
enterprise.
2. Modified index makes up and corrects the evaluation result of basic index according to the
differences and complementariness of financial indexes.
Article 10 Qualitative evaluation on management performance shall refer to the qualitative
analysis and comprehensive judgment on the operation and management level of an enterprise
in a certain period through expert review on the basis of quantitive evaluation on financial
performance of the enterprise.
Article 11 Qualitative evaluation index of management performance shall include the
establishment and execution of enterprise development strategy, business decision making,
development innovation, risk control, base management, human resources, industrial impact,
and social contributions, and other aspects.
Article 12 The quantitive evaluation index of financial performance and the qualitative evaluation
index of management performance of an enterprise constitute the system of comprehensive
performance evaluation index of the enterprise. The weight of each index shall be determined
through referring to the consultant expert's opinions and organizing necessary test on the basis
of the importance of the evaluation indexes and the guiding functions of each index.
Chapter III Evaluation Standard and Evaluation Method
Article 13 The standard of comprehensive performance evaluation on an enterprise shall include
the standard for quantitive evaluation on financial performance and the standard for qualitative
evaluation on management performance.
Article 14 The standard for quantitive evaluation on financial performance shall include domestic
industrial standard and international industrial standard.
1. Domestic industrial standard shall be measured uniformly on the basis of the statistical data for
annual finance and operation and management by adopting the method of mathematical
statistics and promulgated by year, industry, and scale.
2. International industrial standard shall be measured and promulgated on the basis of the actual
value of the relevant financial indexes of large enterprises that rank leading internationally in the
industry, or on the basis of the advanced value of the relevant financial indexes of the same type
of enterprises after getting rid of the difference of business accounting.
Article 15 The classification on the industries subject to the standard of quantitive evaluation on
financial performance shall be made in accordance with the industrial classification for national
economic activities as promulgated by the state uniformly in combination with the reality of the
enterprises.
Article 16 The standard of quantitive evaluation on financial performance may measure out five
levels respectively: excellent value, good value, average value, lower value, and worse value on
the basis of different industries, different scales and types of indexes.
Article 17 A large enterprise group shall, when making evaluation by adopting domestic standards,
make evaluation by adopting international standard positively, and make pairwise comparison on
international advanced levels.
Article 18 The standard of qualitative evaluation on management performance shall be
formulated and promulgated uniformly through combining the actual level of operation and
management of the enterprises and the supervision requirements of capital contributors on the
basis of the evaluation contents, and divided into such five levels as superior, good, medium, low,
and bad. The standard of qualitative evaluation on management performance shall not be
divided by industry, and shall be provided only to the evaluation experts for reference.
Article 19 The actual value of the relevant financial indexes of the quantitive evaluation on
financial performance of an enterprise shall be based on the audited financial statements of the
enterprise, and shall make reasonable elimination on the difference of accounting policies,
acquisition and reorganization of the enterprise, and other objective factors as required, so as to
ensure the comparability of the evaluation result.
Article 20 The score of quantitive evaluation on financial performance shall be measured on the
basis of the actual value of the evaluation index of an enterprise by comparing the industry and
scale standard the enterprise lies in and by using prescribed scoring model.
The score of qualitative evaluation on management performance shall be determined on the
basis of the actual conditions of the relevant factors of management performance of the
enterprise during the period of evaluation by referring to the standard of qualitative evaluation
on management performance.
Article 21 The score of quantitive evaluation on tenure financial performance of an enterprise
shall be made on the basis of financial auditing result of the economic liabilities by using the
evaluation standard of each year during the tenure, and the score of quantitive evaluation on
tenure financial performance of the enterprise shall be reckoned by using arithmetic average
method.
Chapter IV Organization of the Evaluation Work
Article 22 The work of comprehensive performance evaluation on enterprises shall be organized
and implemented in light of the principle of "Unifying the method, unifying the standard, and
implementing through classification".
1. The work for tenure performance evaluation is an important component of the work for
economic liability audit of enterprises, and shall be organized and implemented in accordance
with the procedures of SASAC for the work for audit of economic liabilities.
2. The work for annual performance evaluation is an important content of the work for annual
financial supervision carried out by SASAC, and shall be organized and implemented in light of the
working procedures for settlement of annual financial accounts and the requirements for
financial supervision work of SASAC.
Article 23 SASAC shall undertake the following duties in the work for comprehensive performance
evaluation on enterprises:
1. Formulating systems and policies of comprehensive performance evaluation on enterprises;
2. Establishing and improving comprehensive performance evaluation index system of enterprises
and evaluation methods;
3. Formulating and promulgating the standard for comprehensive performance evaluation on
enterprises;
4. Organizing the implementation of the work for tenure and annual comprehensive performance
evaluation on enterprises, and circulating a report on the evaluation result; and
5. Guiding and supervising over the work for internal performance evaluation on enterprises.
Article 24 The work for tenure performance evaluation may be carried out upon the need of the
work for audit on economic liabilities of enterprises by engaging social intermediary institutions
to give assistance and cooperation. The social intermediary institution that gives cooperation
upon entrustment shall undertake the following functions in the work for comprehensive
performance evaluation on enterprises:
1. Carrying out the work for auditing on financial bases of each year during the tenure upon
entrustment;
2. Assisting in the examination and adjustment on basic data of evaluation each year during the
tenure;
3. Assisting in measuring the result of quantitive evaluation on financial performance during the
tenure
4. Assisting in gathering and collecting the materials of qualitative evaluation on management
performance; and
5. Assisting in the implementation of the work for qualitative evaluation on management
performance.
Article 25 The work for qualitative evaluation on management performance shall be organized
and implemented on the basis of the work for quantitive evaluation on financial performance by
engaging senior experts in the departments of supervision, industrial associations, research
institutions, and social agencies. The experts of management performance evaluation shall
undertake the following work functions:
1. Issuing expert opinions on the result of quantitive evaluation on financial performance of
enterprises;
2. Making analysis and judgment on the actual conditions of the management performance of
enterprises;
3. Making review on the management performance conditions of enterprises and issuing
consultation and advisory opinions; and
4. Determining the score of qualitative evaluation index of management performance of
enterprises.
Article 26 An enterprise shall undertake the following functions in the work for comprehensive
performance evaluation:
1. Providing the relevant annual final statements and audit report;
2. Providing the relevant materials needed for qualitative evaluation on management
performance; and
3. Organizing to carry out the work for comprehensive performance evaluation on its subsidiaries.
Chapter V Evaluation Result and Evaluation Report
Article 27 The evaluation result shall refer to the evaluation conclusions drawn on the basis of the
scores of and analysis on comprehensive performance evaluation.
Article 28 The scores of comprehensive performance evaluation shall be expressed by hundred
mark system, and include such five grades as superior, good, medium, low, and bad.
Article 29 In the comprehensive performance evaluation on enterprises, comparison and analysis
shall be made on the change of performance in different years, so as to evaluate the extent of
improvement on the business achievement and management level of the enterprises.
1. Tenure performance evaluation uses the evaluation result in the last year during the tenure to
compare with the evaluation result of the last year in the previous tenure.
2. Annual performance evaluation uses the evaluation result of the current year to compare with
the evaluation result of the last year.
Article 30 Tenure performance evaluation result is an important basis for evaluating the
fulfillment of duties by the person in charge of an enterprise during his tenure and for
determining the tenure economic liabilities in the work for audit of economic liabilities, and
provides reference for the work of tenure examination on the person in charge of the enterprise.
Article 31 The result of annual performance evaluation is an important basis for carrying out
financial supervision work, and provides reference for the work of annual examination on the
persons in charge of the enterprises.
Article 32 The report of comprehensive performance evaluation on enterprises is the document
which is compiled on the basis of evaluation result, and reflects the performance status of the
enterprises under evaluation, and consists of the main body of the report and the attachment.
1. The main body of the report of comprehensive performance evaluation on enterprises shall
specify the basis of evaluation, process of evaluation, evaluation result, and the major matters
need to be stated.
2. The attachment of the report of comprehensive performance evaluation on enterprises shall
include: analysis report on management performance, evaluation scoring form, analysis on the
result of questionnaire, expert consultation and advisory opinions, and etc., of which: the analysis
report on management performance shall make analysis and diagnosis on the management
performance status of enterprises, factors affecting management performance thereof, and the
existing problems, and bring forward relevant management suggestions.
Article 33 The problems revealed and reflected in the comprehensive performance evaluation on
enterprises shall be fed back to enterprises in a timely manner, and the enterprises shall be
required to pay attention to them.
1. Any problem reflected in the tenure performance evaluation shall be clarified in the handling
opinions on the audit of economic liabilities transferred to the enterprises, and the enterprises
shall be required to pay attention to it and make correction.
2. Any problem reflected in the annual performance evaluation shall be clarified in the reply of
annual final statements, and the enterprises shall be required to pay attention to it and make
correction.
Chapter VI Work Liabilities
Article 34 An enterprise shall provide real and overall basic data materials of performance
evaluation, and the main person in charge of the enterprise, the general accountant, or the
person in charge of financial and accounting work shall be responsible for the truthfulness of the
annual financial statements and the relevant basic evaluation materials.
Article 35 The institutions that carry out the business of comprehensive performance evaluation
on enterprises upon entrustment and the relevant working staff thereof shall strictly implement
the provisions on the work of comprehensive performance evaluation on enterprises, regulate
technical operations, ensure the independence, objectiveness and justness of evaluation process,
and the properness of evaluation conclusions, and shall strictly keep business secrets of the
enterprises. If any institution or personnel participate in making false evaluation, violating
procedures and work rules, and resulting in the inconsistency of the evaluation conclusions with
the facts and revealing of business secrets of enterprises, SASAC shall no longer entrust it/him to
undertake the business of comprehensive performance evaluation on enterprises, and shall
circulate a report on the relevant information to the organ in charge of the industry, and suggest
giving it/him corresponding punishment.
Article 36 The relevant staff members of the SASAC shall, when organizing to carry out the work
for comprehensive performance evaluation on enterprises, earnestly abide by their duties,
regulate the procedures, and strengthen guidance. Any of them who fails to fulfill his duty or
plays favoritism and commits irregularities during the process of comprehensive performance
evaluation, which results in grave negligence in the work shall be given disciplinary punishment.
Article 37 The engaged review experts shall know of and analyze the management performance
conditions of the enterprises carefully, and make review and scoring objectively and justly, and
bring forward reasonable consulting opinions. If any expert is careless and unjust in the process
of management performance evaluation, which results in the inconsistency of the evaluation
result or consulting opinions with the actual conditions of the enterprises, and has a detrimental
impact on the evaluation work, SASAC shall no longer engage him as the review expert.
Chapter VII Supplementary Provisions
Article 38 The Detailed Rules for the Implementation of Comprehensive Performance Evaluation
on Central Enterprises and the evaluation standards formulated in accordance with the present
Measures shall be promulgated additionally.
Article 39 An enterprise may formulate concrete working rules on the basis of the present
Measures for carrying out the work for internal comprehensive performance evaluation.
Article 40 The present Measures shall be referred to for carrying out the work of comprehensive
performance evaluation by state-owned assets supervision and administration organs at each
locality.
Article 41 The present Measures shall be implemented as of May 7, 2006.
国务院国有资产监督管理委员会令
第 14 号
《中央企业综合绩效评价管理暂行办法》已经国务院国有资产监督管理委员会第 38 次
主任办公会议审议通过,现予公布,自 2006 年 5月 7日起施行。
国务院国有资产监督管理委员会主任 李荣融
二OO六年四月七日
中央企业综合绩效评价管理暂行办法
第一章 总 则
第一条 为加强对国务院国有资产监督管理委员会(以下简称国资委)履行出资人职责
企业(以下简称企业)的财务监督,规范企业综合绩效评价工作,综合反映企业资产运营质
量,促进提高资本回报水平,正确引导企业经营行为,根据《企业国有资产监督管理暂行条
例》和国家有关规定,制定本办法。
第二条 本办法所称综合绩效评价,是指以投入产出分析为基本方法,通过建立综合评
价指标体系,对照相应行业评价标准,对企业特定经营期间的盈利能力、资产质量、债务风
险、经营增长以及管理状况等进行的综合评判。
第三条 企业综合绩效评价根据经济责任审计及财务监督工作需要,分为任期绩效评价
和年度绩效评价。
(一)任期绩效评价是指对企业负责人任职期间的经营成果及管理状况进行综合评判。
(二)年度绩效评价是指对企业一个会计年度的经营成果进行综合评判。
第四条 为确保综合绩效评价工作的客观、公正与公平,有效发挥对企业的全面评判、
管理诊断和行为引导作用,开展综合绩效评价工作应当以经社会中介机构审计后的财务会计
报告为基础。
按规定不进行社会中介机构审计的企业,其综合绩效评价工作以经企业内部审计机构审
计后的财务会计报告为基础。
第五条 开展企业综合绩效评价工作应当遵循以下原则:
(一)全面性原则。企业综合绩效评价应当通过建立综合的指标体系,对影响企业绩效
水平的各种因素进行多层次、多角度的分析和综合评判。
(二)客观性原则。企业综合绩效评价应当充分体现市场竞争环境特征,依据统一测算
的、同一期间的国内行业标准或者国际行业标准,客观公正地评判企业经营成果及管理状况。
(三)效益性原则。企业综合绩效评价应当以考察投资回报水平为重点,运用投入产出
分析基本方法,真实反映企业资产运营效率和资本保值增值水平。
(四)发展性原则。企业综合绩效评价应当在综合反映企业年度财务状况和经营成果的
基础上,客观分析企业年度之间的增长状况及发展水平,科学预测企业的未来发展能力。
第六条 国资委依据本办法组织实施企业综合绩效评价工作,并对企业内部绩效评价工
作进行指导和监督。
第二章 评价内容与评价指标
第七条 企业综合绩效评价由财务绩效定量评价和管理绩效定性评价两部分组成。
第八条 财务绩效定量评价是指对企业一定期间的盈利能力、资产质量、债务风险和经
营增长四个方面进行定量对比分析和评判。
(一)企业盈利能力分析与评判主要通过资本及资产报酬水平、成本费用控制水平和经
营现金流量状况等方面的财务指标,综合反映企业的投入产出水平以及盈利质量和现金保障
状况。
(二)企业资产质量分析与评判主要通过资产周转速度、资产运行状态、资产结构以及
资产有效性等方面的财务指标,综合反映企业所占用经济资源的利用效率、资产管理水平与
资产的安全性。
(三)企业债务风险分析与评判主要通过债务负担水平、资产负债结构、或有负债情况、
现金偿债能力等方面的财务指标,综合反映企业的债务水平、偿债能力及其面临的债务风险。
(四)企业经营增长分析与评判主要通过销售增长、资本积累、效益变化以及技术投入
等方面的财务指标,综合反映企业的经营增长水平及发展后劲。
第九条 财务绩效定量评价指标依据各项指标的功能作用划分为基本指标和修正指标。
(一)基本指标反映企业一定期间财务绩效的主要方面,并得出企业财务绩效定量评价
的基本结果。
(二)修正指标是根据财务指标的差异性和互补性,对基本指标的评价结果作进一步的
补充和矫正。
第十条 管理绩效定性评价是指在企业财务绩效定量评价的基础上,通过采取专家评议
的方式,对企业一定期间的经营管理水平进行定性分析与综合评判。
第十一条 管理绩效定性评价指标包括企业发展战略的确立与执行、经营决策、发展创
新、风险控制、基础管理、人力资源、行业影响、社会贡献等方面。
第十二条 企业财务绩效定量评价指标和管理绩效定性评价指标构成企业综合绩效评
价指标体系。各指标的权重,依据评价指标的重要性和各指标的引导功能,通过参照咨询专
家意见和组织必要测试进行确定。
第三章 评价标准与评价方法
第十三条 企业综合绩效评价标准分为财务绩效定量评价标准和管理绩效定性评价标
准。
第十四条 财务绩效定量评价标准包括国内行业标准和国际行业标准。
(一)国内行业标准根据国内企业年度财务和经营管理统计数据,运用数理统计方法,
分年度、分行业、分规模统一测算并发布。
(二)国际行业标准根据居于行业国际领先地位的大型企业相关财务指标实际值,或者
根据同类型企业组相关财务指标的先进值,在剔除会计核算差异后统一测算并发布。
第十五条 财务绩效定量评价标准的行业分类,按照国家统一颁布的国民经济行业分类
标准结合企业实际情况进行划分。
第十六条 财务绩效定量评价标准按照不同行业、不同规模及指标类别,分别测算出优
秀值、良好值、平均值、较低值和较差值五个档次。
第十七条 大型企业集团在采取国内标准进行评价的同时,应当积极采用国际标准进行
评价,开展国际先进水平的对标活动。
第十八条 管理绩效定性评价标准根据评价内容,结合企业经营管理的实际水平和出资
人监管要求,统一制定和发布,并划分为优、良、中、低、差五个档次。管理绩效定性评价
标准不进行行业划分,仅提供给评议专家参考。
第十九条 企业财务绩效定量评价有关财务指标实际值应当以经审计的企业财务会计
报告为依据,并按照规定对会计政策差异、企业并购重组等客观因素进行合理剔除,以保证
评价结果的可比性。
第二十条 财务绩效定量评价计分以企业评价指标实际值对照企业所处行业、规模标
准,运用规定的计分模型进行定量测算。
管理绩效定性评价计分由专家组根据评价期间企业管理绩效相关因素的实际情况,参考
管理绩效定性评价标准,确定分值。
第二十一条 对企业任期财务绩效定量评价计分应当依据经济责任财务审计结果,运用
各年度评价标准对任期各年度的财务绩效进行分别评价,并运用算术平均法计算出企业任期
财务绩效定量评价分数。
第四章 评价工作组织
第二十二条 企业综合绩效评价工作按照“统一方法、统一标准、分类实施”的原则组
织实施。
(一)任期绩效评价工作,是企业经济责任审计工作的重要组成部分,依据国资委经济
责任审计工作程序和要求组织实施。
(二)年度绩效评价工作,是国资委开展企业年度财务监督工作的重要内容,依据国资
委年度财务决算工作程序和财务监督工作要求组织实施。
第二十三条 国资委在企业综合绩效评价工作中承担以下职责:
(一)制定企业综合绩效评价制度与政策;
(二)建立和完善企业综合绩效评价指标体系与评价方法;
(三)制定和公布企业综合绩效评价标准;
(四)组织实施企业任期和年度综合绩效评价工作,通报评价结果;
(五)对企业内部绩效评价工作进行指导和监督。
第二十四条 任期绩效评价工作可以根据企业经济责任审计工作需要,聘请社会中介机
构协助配合开展。受托配合的社会中介机构在企业综合绩效评价工作中承担以下职责:
(一)受托开展任期各年度财务基础审计工作;
(二)协助审核调整任期各年度评价基础数据;
(三)协助测算任期财务绩效定量评价结果;
(四)协助收集整理管理绩效定性评价资料;
(五)协助实施管理绩效定性评价工作。
第二十五条 管理绩效定性评价工作应当在财务绩效定量评价工作的基础上,聘请监管
部门、行业协会、研究机构、社会中介等方面的资深专家组织实施。管理绩效评价专家承担
以下工作职责:
(一)对企业财务绩效定量评价结果发表专家意见;
(二)对企业管理绩效实际状况进行分析和判断;
(三)对企业管理绩效状况进行评议,并发表咨询意见;
(四)确定企业管理绩效定性评价指标分值。
第二十六条 企业在综合绩效评价工作中承担以下职责:
(一)提供有关年度财务决算报表和审计报告;
(二)提供管理绩效定性评价所需的有关资料;
(三)组织开展子企业的综合绩效评价工作。
第五章 评价结果与评价报告
第二十七条 评价结果是指根据综合绩效评价分数及分析得出的评价结论。
第二十八条 综合绩效评价分数用百分制表示,并分为优、良、中、低、差五个等级。
第二十九条 企业综合绩效评价应当进行年度之间绩效变化的比较分析,客观评价企业
经营成果与管理水平的提高程度。
(一)任期绩效评价运用任期最后年度评价结果与上一任期最后年度评价结果进行对比。
(二)年度绩效评价运用当年评价结果与上年评价结果进行对比。
第三十条 任期绩效评价结果是经济责任审计工作中评估企业负责人任期履行职责情
况和认定任期经济责任的重要依据,并为企业负责人任期考核工作提供参考。
第三十一条 年度绩效评价结果是开展财务监督工作的重要依据,并为企业负责人年度
考核工作提供参考。
第三十二条 企业综合绩效评价报告是根据评价结果编制、反映被评价企业绩效状况的
文件,由报告正文和附件构成。
(一)企业综合绩效评价报告正文应当说明评价依据、评价过程、评价结果,以及需要
说明的重大事项。
(二)企业综合绩效评价报告附件包括经营绩效分析报告、评价计分表、问卷调查结果
分析、专家咨询意见等,其中:经营绩效分析报告应当对企业经营绩效状况、影响因素、存
在的问题等进行分析和诊断,并提出相关管理建议。
第三十三条 对企业综合绩效评价揭示和反映的问题,应当及时反馈企业,并要求企业
予以关注。
(一)对于任期绩效评价反映的问题,应当在下达企业的经济责任审计处理意见书中明
确指出,并要求企业予以关注和整改。
(二)对于年度绩效评价结果反映的问题,应当在年度财务决算批复中明确指出,并要
求企业予以关注和整改。
第六章 工作责任
第三十四条 企业应当提供真实、全面的绩效评价基础数据资料,企业主要负责人、总
会计师或主管财务会计工作的负责人应当对提供的年度财务会计报表和相关评价基础资料
的真实性负责。
第三十五条 受托开展企业综合绩效评价业务的机构及其相关工作人员应严格执行企
业综合绩效评价工作的规定,规范技术操作,确保评价过程独立、客观、公正,评价结论适
当,并严守企业的商业秘密。对参与造假、违反程序和工作规定,导致评价结论失实以及泄
露企业商业秘密的,国资委将不再委托其承担企业综合绩效评价业务,并将有关情况通报其
行业主管机关,建议给予相应处罚。
第三十六条 国资委的相关工作人员组织开展企业综合绩效评价工作应当恪尽职守、规
范程序、加强指导。对于在综合绩效评价过程中不尽职或者徇私舞弊,造成重大工作过失的,
给予纪律处分。
第三十七条 所聘请的评议专家应当认真了解和分析企业的管理绩效状况,客观公正地
进行评议打分,并提出合理的咨询意见。对于在管理绩效评价过程中不认真、不公正,出现
评议结果或者咨询意见不符合企业实际情况,对评价工作造成不利影响的,国资委将不再继
续聘请其为评议专家。
第七章 附 则
第三十八条 根据本办法制定的《中央企业综合绩效评价实施细则》和评价标准另行公
布。
第三十九条 企业开展内部综合绩效评价工作,可依据本办法制定具体的工作规范。
第四十条 各地区国有资产监督管理机构开展综合绩效评价工作,可参照本办法执行。
第四十一条 本办法自 2006 年 5月 7日起施行。
This work is published on the responsibility of the Secretary-General of the OECD.The opinions expressed and arguments employed herein do not necessarily reflectthe official views of the Organisation or of the governments of its member countries.
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Please cite this publication as:OECD (2011), OECD Guidelines for Multinational Enterprises, OECD Publishing.http://dx.doi.org/10.1787/9789264115415-en
The OECD Guidelines for Multinational Enterprises are recommendations addressed by governments to multinational enterprises operating in or from adhering countries. They provide non-binding principles and standards for responsible business conduct in a global context consistent with applicable laws and internationally recognised standards. The Guidelines are the only multilaterally agreed and comprehensive code of responsible business conduct that governments have committed to promoting.
The Guidelines’ recommendations express the shared values of the governments of countries from which a large share of international direct investment originates and which are home to many of the largest multinational enterprises. The Guidelines aim to promote positive contributions by enterprises to economic, environmental and social progress worldwide.
The Guidelines are supported by a unique implementation mechanism of National Contact Points (NCPs), agencies established by adhering governments to promote and implement the Guidelines. The NCPs assist enterprises and their stakeholders to take appropriate measures to further the implementation of the Guidelines. They also provide a mediation and conciliation platform for resolving practical issues that may arise.
On 4 May 2010, the governments of the 42 OECD and non-OECD countries adhering to the OECD Declaration on International Investment and Multinational Enterprises and related Decision started work on updating the Guidelines to reflect changes in the landscape for international investment and multinational enterprises since the last review in 2000. The changes agreed aim to ensure the continued role of the Guidelines as a leading international instrument for the promotion of responsible business conduct.
The updated Guidelines and the related Decision were adopted by the 42 adhering governments on 25 May 2011 at the OECD’s 50th Anniversary Ministerial Meeting.
Changes to the Guidelines include:
• A new human rights chapter, which is consistent with the Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework.
• A new and comprehensive approach to due diligence and responsible supply chain management representing significant progress relative to earlier approaches.
• Important changes in many specialised chapters, such as on Employment and Industrial Relations; Combating Bribery, Bribe Solicitation and Extortion, Environment, Consumer Interests, Disclosure and Taxation.
• Clearer and reinforced procedural guidance to strengthen the role of the NCPs, improve their performance and foster functional equivalence.
• A pro-active implementation agenda to assist enterprises in meeting their responsibilities as new challenges arise.
The Update of the Guidelines was conducted by the adhering governments and included intensive consultations with a wide range of stakeholders and partners. All non-adhering G20 countries were invited to participate on an equal footing; they made important contributions, as did participants in the regional consultations in Asia, Africa, Latin America and the Middle East and North Africa. The OECD Business and Industry Advisory Committee, the OECD Trade Union Advisory Committee and OECD Watch represented the views of business, workers' organisations and non-governmental organisations (NGOs) through regular consultation meetings and their active participation in the Advisory Group of the Chair of the Working Party responsible for the Update of the Guidelines. The UN Secretary-General’s Special Representative on Business and Human Rights, Professor John Ruggie, the International Labour Organisation together with other international organisations, also provided extensive input on the Update.
OECD committees on Competition; Consumer Policy; Corporate Governance; Employment, Labour and Social Affairs; Environment Policy; Fiscal Affairs; and the Working Group on Bribery in International Business Transactions contributed to the revisions of the relevant specialised chapters of the Guidelines.
The work on the Update was supported by the Investment Division as Secretariat of the OECD Investment Committee, in close collaboration with the Legal Directorate; the Centre for Tax Policy and Administration; the Anti-Corruption Division; the Competition Division; the Corporate Affairs Division; the Division for Employment Analysis and Policy; the Environment and Economy Integration Division; and the Information, Communications and Consumer Policy Division.
Declaration on International Investment and Multinational Enterprises .................. 7
Part I OECD Guidelines for Multinational Enterprises
Recommendations for responsible business conduct in a global context
Preface .......................................................................................................................... 13 I. Concepts and Principles ..................................................................................... 17II. General Policies .................................................................................................. 19 III. Disclosure ........................................................................................................... 27IV. Human Rights ..................................................................................................... 31V. Employment and Industrial Relations ................................................................ 35VI. Environment ....................................................................................................... 42VII. Combating Bribery, Bribe Solicitation and Extortion ........................................ 47VIII. Consumer Interests ............................................................................................. 51IX. Science and Technology ..................................................................................... 55X. Competition ........................................................................................................ 57XI. Taxation .............................................................................................................. 60
Part II Implementation Procedures of the OECD Guidelines for Multinational Enterprises
Amendment of the Decision of the Council on the OECD Guidelines for Multinational Enterprises ....................................................................................... 67
I. National Contact Points ......................................................................................... 68II. The Investment Committee ................................................................................... 68III. Review of the Decision ......................................................................................... 69
I. National Contact Points ......................................................................................... 71II. Investment Committee .......................................................................................... 74
Commentary on the Implementation Procedures ....................................................... 77
I. Commentary on the Procedural Guidance for NCPs ............................................. 78 II. Commentary on the Procedural Guidance for the Investment Committee ............ 88
DECLARATION ON INTERNATIONAL INVESTMENT AND MULTINATIONAL ENTERPRISES
25 May 2011
ADHERING GOVERNMENTS1
CONSIDERING:
- That international investment is of major importance to the world economy, and has considerably contributed to the development of their countries;
- That multinational enterprises play an important role in this investment process;
- That international co-operation can improve the foreign investment climate, encourage the positive contribution which multinational enterprises can make to economic, social and environmental progress, and minimise and resolve difficulties which may arise from their operations;
- That the benefits of international co-operation are enhanced by addressing issues relating to international investment and multinational enterprises through a balanced framework of inter-related instruments;
1. As at 25 May 2011 adhering governments are those of all OECD members, as well as Argentina, Brazil, Egypt, Latvia, Lithuania, Morocco, Peru and Romania. The European Community has been invited to associate itself with the section on National Treatment on matters falling within its competence.
I. That they jointly recommend to multinational enterprises operating in or from their territories the observance of the Guidelines, set forth in Annex 1hereto2, having regard to the considerations and understandings that are set out in the Preface and are an integral part of them;”
National Treatment
II. 1. That adhering governments should, consistent with their needs to maintain public order, to protect their essential security interests and to fulfil commitments relating to international peace and security, accord to enterprises operating in their territories and owned or controlled directly or indirectly by nationals of another adhering government (hereinafter referred to as "Foreign-Controlled Enterprises") treatment under their laws, regulations and administrative practices, consistent with international law and no less favourable than that accorded in like situations to domestic enterprises (hereinafter referred to as "National Treatment");
2. That adhering governments will consider applying "National Treatment" in respect of countries other than adhering governments;
3. That adhering governments will endeavour to ensure that their territorial subdivisions apply "National Treatment";
4. That this Declaration does not deal with the right of adhering governments to regulate the entry of foreign investment or the conditions of establishment of foreign enterprises;
2. The text of the Guidelines for Multinational Enterprises is reproduced in Part I of this publication.
III. That they will co-operate with a view to avoiding or minimising the imposition of conflicting requirements on multinational enterprises and that they will take into account the general considerations and practical approaches as set forth in Annex 2 hereto3.
International Investment Incentives and Disincentives
IV. 1. That they recognise the need to strengthen their co-operation in the field of international direct investment;
2. That they thus recognise the need to give due weight to the interests of adhering governments affected by specific laws, regulations and administrative practices in this field (hereinaftercalled "measures") providing official incentives and disincentives to international direct investment;
3. That adhering governments will endeavour to make such measures as transparent as possible, so that their importance and purpose can be ascertained and that information on them can be readily available;
Consultation Procedures
V. That they are prepared to consult one another on the above matters in conformity with the relevant Decisions of the Council;
Review VI. That they will review the above matters periodically with a view to improving the effectiveness of international economic co-operation among adhering governments on issues relating to international investment and multinational enterprises.
3. The text of General Considerations and Practical Approaches concerning Conflicting Requirements Imposed on Multinational Enterprises is available from the OECD Website www.oecd.org/daf/investment.
Recommendations for responsible business conduct in a global context
Text and Commentary
Note by the Secretariat: The commentaries on the OECD Guidelines for Multinational Enterprises have been adopted by the Investment Committee in enlarged session, including the eight non-Member adherents* to the Declaration on International Investment and Multinational Enterprises, to provide information on and explanation of the text of the Guidelines for Multinational Enterprises and of the Council Decision on the OECDGuidelines for Multinational Enterprises. They are not part of the Declaration on International Investment and Multinational Enterprises or of the Council Decision on the OECD Guidelines for Multinational Enterprises.
In this publication, the commentaries are placed after the chapter they refer to and are numbered consecutively from 1 to 106.
* Argentina, Brazil, Egypt, Latvia, Lithuania, Morocco, Peru and Romania.
1. The OECD Guidelines for Multinational Enterprises (the Guidelines)are recommendations addressed by governments to multinational enterprises. The Guidelines aim to ensure that the operations of these enterprises are in harmony with government policies, to strengthen the basis of mutual confidence between enterprises and the societies in which they operate, to help improve the foreign investment climate and to enhance the contribution to sustainable development made by multinational enterprises. The Guidelines are part of the OECD Declaration on International Investment and Multinational Enterprisesthe other elements of which relate to national treatment, conflicting requirements on enterprises, and international investment incentives and disincentives. The Guidelines provide voluntary principles and standards for responsible business conduct consistent with applicable laws andinternationally recognised standards. However, the countries adhering to the Guidelines make a binding commitment to implement them in accordance with the Decision of the OECD Council on the OECD Guidelines for Multinational Enterprises. Furthermore, matters covered by the Guidelines may also be the subject of national law and international commitments.
2. International business has experienced far-reaching structural change and the Guidelines themselves have evolved to reflect these changes. With the rise of service and knowledge-intensive industries and the expansion of the Internet economy, service and technology enterprises are playing an increasingly important role in the international marketplace. Large enterprises still account for a major share of international investment, and there is a trend toward large-scale international mergers. At the same time, foreign investment by small- and medium-sized enterprises has also increased and these enterprises now play a significant role on the international scene. Multinational enterprises, like their domestic counterparts, have evolved to encompass a broader range of business arrangements and organisational forms. Strategic alliances and closer relations with suppliers and contractors tend to blur the boundaries of the enterprise.
3. The rapid evolution in the structure of multinational enterprises is also reflected in their operations in the developing world, where foreign direct investment has grown rapidly. In developing countries, multinational enterprises have diversified beyond primary production and extractive industries into manufacturing, assembly, domestic market development and services. Another key development is the emergence of multinational enterprises based in developing countries as major international investors.
4. The activities of multinational enterprises, through international trade and investment, have strengthened and deepened the ties that join the countries and regions of the world. These activities bring substantial benefits to home and host countries. These benefits accrue when multinational enterprises supply the products and services that consumers want to buy at competitive prices and when they provide fair returns to suppliers of capital. Their trade and investment activities contribute to the efficient use of capital, technology and human and natural resources. They facilitate the transfer of technology among the regions of the world and the development of technologies that reflect local conditions. Through both formal training and on-the-job learning enterprises also promote the development of human capital and creating employment opportunities in host countries.
5. The nature, scope and speed of economic changes have presented new strategic challenges for enterprises and their stakeholders. Multinational enterprises have the opportunity to implement best practice policies for sustainable development that seek to ensure coherence between economic, environmental and social objectives. The ability of multinational enterprises to promote sustainable development is greatly enhanced when trade and investment are conducted in a context of open, competitive and appropriately regulated markets.
6. Many multinational enterprises have demonstrated that respect for high standards of business conduct can enhance growth. Today’s competitive forces are intense and multinational enterprises face a variety of legal, social and regulatory settings. In this context, some enterprises may be tempted to neglect appropriate principles and standards of conduct in an attempt to gain undue competitive advantage. Such practices by the few may call into question the reputation of the many and may give rise to public concerns.
7. Many enterprises have responded to these public concerns by developing internal programmes, guidance and management systems that underpin their commitment to good corporate citizenship, good practices and good business and employee conduct. Some of them have
called upon consulting, auditing and certification services, contributing to the accumulation of expertise in these areas. Enterprises have also promoted social dialogue on what constitutes responsible business conduct and have worked with stakeholders, including in the context of multi-stakeholder initiatives, to develop guidance for responsible business conduct. The Guidelines clarify the shared expectations for business conduct of the governments adhering to them and provide a point of reference for enterprises and for other stakeholders. Thus, the Guidelines both complement and reinforce private efforts to define and implement responsible business conduct.
8. Governments are co-operating with each other and with other actors to strengthen the international legal and policy framework in which business is conducted. The start of this process can be dated to the work of the International Labour Organisation in the early twentieth century. The adoption by the United Nations in 1948 of the Universal Declaration of Human Rights was another landmark event. It was followed by the ongoing development of standards relevant for many areas of responsible business conduct – a process that continues to this day. The OECD has contributed in important ways to this process through the development of standards covering such areas as the environment, the fight against corruption, consumer interests, corporate governance and taxation.
9. The common aim of the governments adhering to the Guidelines is to encourage the positive contributions that multinational enterprises can make to economic, environmental and social progress and to minimise the difficulties to which their various operations may give rise. In working towards this goal, governments find themselves in partnership with the many businesses, trade unions and other non-governmental organisations that are working in their own ways toward the same end. Governments can help by providing effective domestic policy frameworks that include stable macroeconomic policy, non-discriminatory treatment of enterprises, appropriate regulation and prudential supervision, an impartial system of courts and law enforcement and efficient and honest public administration. Governments can also help by maintaining and promoting appropriate standards and policies in support of sustainable development and by engaging in ongoing reforms to ensure that public sector activity is efficient and effective. Governments adhering to the Guidelines are committed to continuous improvement of both domestic and international policies with a view to improving the welfare and living standards of all people.
1. The Guidelines are recommendations jointly addressed by governments to multinational enterprises. They provide principles and standards of good practice consistent with applicable laws and internationally recognised standards. Observance of the Guidelines by enterprises is voluntary and not legally enforceable. Nevertheless, some matters covered by the Guidelines may also be regulated by national law or international commitments.
2. Obeying domestic laws is the first obligation of enterprises. The Guidelines are not a substitute for nor should they be considered to override domestic law and regulation. While the Guidelines extend beyond the law in many cases, they should not and are not intended to place an enterprise in situations where it faces conflicting requirements. However, in countries where domestic laws and regulations conflict with the principles and standards of the Guidelines, enterprises should seek ways to honour such principles and standards to the fullest extent which does not place them in violation of domestic law.
3. Since the operations of multinational enterprises extend throughout the world, international co-operation in this field should extend to all countries. Governments adhering to the Guidelines encourage the enterprises operating on their territories to observe the Guidelineswherever they operate, while taking into account the particular circumstances of each host country.
4. A precise definition of multinational enterprises is not required for the purposes of the Guidelines. These enterprises operate in all sectors of the economy. They usually comprise companies or other entities established in more than one country and so linked that they may co-ordinate their operations in various ways. While one or more of these entities may be able to exercise a significant influence over the activities of others, their degree of autonomy within the enterprise may vary widely from one multinational enterprise to another. Ownership may be private, State or mixed. The Guidelines are addressed to all the entities within the multinational enterprise (parent companies and/or local entities). According to the actual distribution of responsibilities among
them, the different entities are expected to co-operate and to assist one another to facilitate observance of the Guidelines.
5. The Guidelines are not aimed at introducing differences of treatment between multinational and domestic enterprises; they reflect good practice for all. Accordingly, multinational and domestic enterprises are subject to the same expectations in respect of their conduct wherever the Guidelines are relevant to both.
6. Governments wish to encourage the widest possible observance of the Guidelines. While it is acknowledged that small- and medium-sized enterprises may not have the same capacities as larger enterprises, governments adhering to the Guidelines nevertheless encourage them to observe the Guidelines’ recommendations to the fullest extent possible.
7. Governments adhering to the Guidelines should not use them for protectionist purposes nor use them in a way that calls into question the comparative advantage of any country where multinational enterprises invest.
8. Governments have the right to prescribe the conditions under which multinational enterprises operate within their jurisdictions, subject to international law. The entities of a multinational enterprise located in various countries are subject to the laws applicable in these countries. When multinational enterprises are subject to conflicting requirements by adhering countries or third countries, the governments concerned are encouraged to co-operate in good faith with a view to resolving problems that may arise.
9. Governments adhering to the Guidelines set them forth with the understanding that they will fulfil their responsibilities to treat enterprises equitably and in accordance with international law and with their contractual obligations.
10. The use of appropriate international dispute settlement mechanisms, including arbitration, is encouraged as a means of facilitating the resolution of legal problems arising between enterprises and host country governments.
11. Governments adhering to the Guidelines will implement them and encourage their use. They will establish National Contact Points that promote the Guidelines and act as a forum for discussion of all matters relating to the Guidelines. The adhering Governments will also participate in appropriate review and consultation procedures to address issues concerning interpretation of the Guidelines in a changing world.
Enterprises should take fully into account established policies in the countries in which they operate, and consider the views of other stakeholders. In this regard:
A. Enterprises should:
1. Contribute to economic, environmental and social progress with a view to achieving sustainable development.
2. Respect the internationally recognised human rights of those affected by their activities.
3. Encourage local capacity building through close co-operation with the local community, including business interests, as well as developing the enterprise’s activities in domestic and foreign markets, consistent with the need for sound commercial practice.
4. Encourage human capital formation, in particular by creating employment opportunities and facilitating training opportunities for employees.
5. Refrain from seeking or accepting exemptions not contemplated in the statutory or regulatory framework related to human rights, environmental, health, safety, labour, taxation, financial incentives, or other issues.
6. Support and uphold good corporate governance principles and develop and apply good corporate governance practices, including throughout enterprise groups.
7. Develop and apply effective self-regulatory practices and management systems that foster a relationship of confidence and mutual trust between enterprises and the societies in which they operate.
8. Promote awareness of and compliance by workers employed by multinational enterprises with respect to company policies through appropriate dissemination of these policies, including through training programmes.
9. Refrain from discriminatory or disciplinary action against workers who make bona fide reports to management or, as appropriate, to the competent public authorities, on practices that contravene the law, the Guidelines or the enterprise’s policies.
10. Carry out risk-based due diligence, for example by incorporating it into their enterprise risk management systems, to identify, prevent and mitigate actual and potential adverse impacts as described in paragraphs 11 and 12, and account for how these impacts are addressed. The nature and extent of due diligence depend on the circumstances of a particular situation.
11. Avoid causing or contributing to adverse impacts on matters covered by the Guidelines, through their own activities, and address such impacts when they occur.
12. Seek to prevent or mitigate an adverse impact where they have not contributed to that impact, when the impact is nevertheless directly linked to their operations, products or services by a business relationship. This is not intended to shift responsibility from the entity causing an adverse impact to the enterprise with which it has a business relationship.
13. In addition to addressing adverse impacts in relation to matters covered by the Guidelines, encourage, where practicable, business partners, including suppliers and sub-contractors, to apply principles of responsible business conduct compatible with the Guidelines.
14. Engage with relevant stakeholders in order to provide meaningful opportunities for their views to be taken into account in relation to planning and decision making for projects or other activities that may significantly impact local communities.
15. Abstain from any improper involvement in local political activities.
B. Enterprises are encouraged to:
1. Support, as appropriate to their circumstances, cooperative efforts in the appropriate fora to promote Internet Freedom through respect of freedom of expression, assembly and association online.
2. Engage in or support, where appropriate, private or multi-stakeholder initiatives and social dialogue on responsible supply chain management while ensuring that these initiatives take due account of their social and economic effects on developing countries and of existing internationally recognised standards.
1. The General Policies chapter of the Guidelines is the first to contain specific recommendations to enterprises. As such it is important for setting the tone and establishing common fundamental principles for the specific recommendations in subsequent chapters.
2. Enterprises are encouraged to co-operate with governments in the development and implementation of policies and laws. Considering the views of other stakeholders in society, which includes the local community as well as business interests, can enrich this process. It is also recognised that governments should be transparent in their dealings with enterprises, and consult with business on these same issues. Enterprises should be viewed as partners with government in the development and use of both voluntary and regulatory approaches (of which the Guidelines are one element) to policies affecting them.
3. There should not be any contradiction between the activity of multinational enterprises (MNEs) and sustainable development, and the Guidelines are meant to foster complementarities in this regard. Indeed, links among economic, social, and environmental progress are a key means for furthering the goal of sustainable development.4
4. Chapter IV elaborates on the general human rights recommendation in paragraph A.2.
5. The Guidelines also acknowledge and encourage the contribution that MNEs can make to local capacity building as a result of their activities in local communities. Similarly, the recommendation on human capital formation is an explicit and forward-looking recognition of the contribution to individual human development that MNEs can offer their employees, and encompasses not only hiring practices, but training and other employee development as well. Human capital formation also incorporates the notion of non-discrimination in hiring practices as well as promotion practices, life-long learning and other on-the-job training.
6. The Guidelines recommend that, in general, enterprises avoid making efforts to secure exemptions not contemplated in the statutory or regulatory framework related to human rights, environmental, health, safety, labour, taxation and financial incentives among other issues, without infringing on an enterprise’s right to seek changes in the
4. One of the most broadly accepted definitions of sustainable development is in the 1987 World Commission on Environment and Development (the Brundtland Commission): “Development that meets the needs of the present without compromising the ability of future generations to meet their own needs”.
statutory or regulatory framework. The words “or accepting” also draw attention to the role of the State in offering these exemptions. While this sort of provision has been traditionally directed at governments, it is also of direct relevance to MNEs. Importantly, however, there are instances where specific exemptions from laws or other policies can be consistent with these laws for legitimate public policy reasons. The environment and competition policy chapters provide examples.
7. The Guidelines recommend that enterprises apply good corporate governance practices drawn from the OECD Principles of Corporate Governance. The Principles call for the protection and facilitation of the exercise of shareholder rights, including the equitable treatment of shareholders. Enterprise should recognise the rights of stakeholders established by law or through mutual agreements and encourage active co-operation with stakeholders in creating wealth, jobs, and the sustainability of financially sound enterprises.
8. The Principles call on the board of the parent entity to ensure the strategic guidance of the enterprise, the effective monitoring of management and to be accountable to the enterprise and to the shareholders, while taking into account the interests of stakeholders. In undertaking these responsibilities, the board needs to ensure the integrity of the enterprise’s accounting and financial reporting systems, including independent audit, appropriate control systems, in particular, risk management, and financial and operational control, and compliance with the law and relevant standards.
9. The Principles extend to enterprise groups, although boards of subsidiary enterprises might have obligations under the law of their jurisdiction of incorporation. Compliance and control systems should extend where possible to these subsidiaries. Furthermore, the board’s monitoring of governance includes continuous review of internal structures to ensure clear lines of management accountability throughout the group.
10. State-owned multinational enterprises are subject to the same recommendations as privately-owned enterprises, but public scrutiny is often magnified when a State is the final owner. The OECD Guidelineson Corporate Governance of State-Owned Enterprises are a useful and specifically tailored guide for these enterprises and the recommendations they offer could significantly improve governance.
11. Although primary responsibility for improving the legal and institutional regulatory framework lies with governments, there is a strong business case for enterprises to implement good corporate governance.
12. An increasing network of non-governmental self-regulatory instruments and actions address aspects of corporate behaviour and the relationships between business and society. Interesting developments in this regard are being undertaken in the financial sector. Enterprises recognise that their activities often have social and environmental implications. The institution of self-regulatory practices and management systems by enterprises sensitive to reaching these goals – thereby contributing to sustainable development – is an illustration of this. In turn, developing such practices can further constructive relationships between enterprises and the societies in which they operate.
13. Following from effective self-regulatory practices, as a matter of course, enterprises are expected to promote employee awareness of company policies. Safeguards to protect bona fide “whistle-blowing” activities are also recommended, including protection of employees who, in the absence of timely remedial action or in the face of reasonable risk of negative employment action, report practices that contravene the law to the competent public authorities. While of particular relevance to anti-bribery and environmental initiatives, such protection is also relevant to other recommendations in the Guidelines.
14. For the purposes of the Guidelines, due diligence is understood as the process through which enterprises can identify, prevent, mitigate and account for how they address their actual and potential adverse impacts as an integral part of business decision-making and risk management systems. Due diligence can be included within broader enterprise risk management systems, provided that it goes beyond simply identifying and managing material risks to the enterprise itself, to include the risks of adverse impacts related to matters covered by the Guidelines.Potential impacts are to be addressed through prevention or mitigation, while actual impacts are to be addressed through remediation. The Guidelines concern those adverse impacts that are either caused or contributed to by the enterprise, or are directly linked to their operations, products or services by a business relationship, as described in paragraphs A.11 and A.12. Due diligence can help enterprises avoid the risk of such adverse impacts. For the purposes of this recommendation, ‘contributing to’ an adverse impact should be interpreted as a substantial contribution, meaning an activity that causes, facilitates or incentivises another entity to cause an adverse impact and does not include minor or trivial contributions. The term ‘business relationship’ includes relationships with business partners, entities in the supply chain and any other non-State or State entities directly linked to its business operations, products or services. The recommendation in paragraph A.10 applies to those matters covered by the Guidelines that are related
to adverse impacts. It does not apply to the chapters on Science and Technology, Competition and Taxation.
15. The nature and extent of due diligence, such as the specific steps to be taken, appropriate to a particular situation will be affected by factors such as the size of the enterprise, context of its operations, the specific recommendations in the Guidelines, and the severity of its adverse impacts. Specific recommendations for human rights due diligence are provided in Chapter IV.
16. Where enterprises have large numbers of suppliers, they are encouraged to identify general areas where the risk of adverse impacts is most significant and, based on this risk assessment, prioritise suppliers for due diligence.
17. To avoid causing or contributing to adverse impacts on matters covered by the Guidelines through their own activities includes their activities in the supply chain. Relationships in the supply chain take a variety of forms including, for example, franchising, licensing or subcontracting. Entities in the supply chain are often multinational enterprises themselves and, by virtue of this fact, those operating in or from the countries adhering to the Declaration are covered by the Guidelines.
18. In the context of its supply chain, if the enterprise identifies a risk of causing an adverse impact, then it should take the necessary steps to cease or prevent that impact.
19. If the enterprise identifies a risk of contributing to an adverse impact, then it should take the necessary steps to cease or prevent its contribution and use its leverage to mitigate any remaining impacts to the greatest extent possible. Leverage is considered to exist where the enterprise has the ability to effect change in the wrongful practices of the entity that causes the harm.
20. Meeting the expectation in paragraph A.12 would entail an enterprise, acting alone or in co-operation with other entities, as appropriate, to use its leverage to influence the entity causing the adverse impact to prevent or mitigate that impact.
21. The Guidelines recognise that there are practical limitations on the ability of enterprises to effect change in the behaviour of their suppliers. These are related to product characteristics, the number of suppliers, the structure and complexity of the supply chain, the market position of the enterprise vis-à-vis its suppliers or other entities in the supply chain. However, enterprises can also influence suppliers through contractual arrangements such as management contracts, pre-qualification requirements for potential suppliers, voting trusts, and licence or
franchise agreements. Other factors relevant to determining the appropriate response to the identified risks include the severity and probability of adverse impacts and how crucial that supplier is to the enterprise.
22. Appropriate responses with regard to the business relationship may include continuation of the relationship with a supplier throughout the course of risk mitigation efforts; temporary suspension of the relationship while pursuing ongoing risk mitigation; or, as a last resort, disengagement with the supplier either after failed attempts at mitigation, or where the enterprise deems mitigation not feasible, or because of the severity of the adverse impact. The enterprise should also take into account potential social and economic adverse impacts related to the decision to disengage.
23. Enterprises may also engage with suppliers and other entities in the supply chain to improve their performance, in co-operation with other stakeholders, including through personnel training and other forms of capacity building, and to support the integration of principles of responsible business conduct compatible with the Guidelines into their business practices. Where suppliers have multiple customers and are potentially exposed to conflicting requirements imposed by different buyers, enterprises are encouraged, with due regard to anti-competitive concerns, to participate in industry-wide collaborative efforts with other enterprises with which they share common suppliers to coordinate supply chain policies and risk management strategies, including through information-sharing.
24. Enterprises are also encouraged to participate in private or multi-stakeholder initiatives and social dialogue on responsible supply chain management, such as those undertaken as part of the proactive agenda pursuant to the Decision of the OECD Council on the OECD Guidelinesfor Multinational Enterprises and the attached Procedural Guidance.
25. Stakeholder engagement involves interactive processes of engagement with relevant stakeholders, through, for example, meetings, hearings or consultation proceedings. Effective stakeholder engagement is characterised by two-way communication and depends on the good faith of the participants on both sides. This engagement can be particularly helpful in the planning and decision-making concerning projects or other activities involving, for example, the intensive use of land or water, which could significantly affect local communities.
26. Paragraph B.1 acknowledges an important emerging issue. It does not create new standards, nor does it presume the development of new standards. It recognises that enterprises have interests which will be
affected and that their participation along with other stakeholders in discussion of the issues involved can contribute to their ability and that of others to understand the issues and make a positive contribution. It recognises that the issues may have a number of dimensions and emphasises that co-operation should be pursued through appropriate fora. It is without prejudice to positions held by governments in the area of electronic commerce at the World Trade Organisation (WTO). It is not intended to disregard other important public policy interests which may relate to the use of the internet which would need to be taken into account.5 Finally, as is the case with the Guidelines in general, it is not intended to create conflicting requirements for enterprises consistent with paragraphs 2 and 8 of the Concepts and Principles Chapter of the Guidelines.
27. Finally, it is important to note that self-regulation and other initiatives in a similar vein, including the Guidelines, should not unlawfully restrict competition, nor should they be considered a substitute for effective law and regulation by governments. It is understood that MNEs should avoid potential trade or investment distorting effects of codes and self-regulatory practices when they are being developed.
5. Some countries have referred to the 2005 Tunis Agenda for the Information Society in this regard.
1. Enterprises should ensure that timely and accurate information is disclosed on all material matters regarding their activities, structure, financial situation, performance, ownership and governance. This information should be disclosed for the enterprise as a whole, and, where appropriate, along business lines or geographic areas. Disclosure policies of enterprises should be tailored to the nature, size and location of the enterprise, with due regard taken of costs, business confidentiality and other competitive concerns.
2. Disclosure policies of enterprises should include, but not be limited to, material information on:
a) the financial and operating results of the enterprise;
b) enterprise objectives;
c) major share ownership and voting rights, including the structure of a group of enterprises and intra-group relations, as well as control enhancing mechanisms;
d) remuneration policy for members of the board and key executives, and information about board members, including qualifications, the selection process, other enterprise directorships and whether each board member is regarded as independent by the board;
e) related party transactions;
f) foreseeable risk factors;
g) issues regarding workers and other stakeholders;
h) governance structures and policies, in particular, the content of any corporate governance code or policy and its implementation process.
3. Enterprises are encouraged to communicate additional information that could include:
a) value statements or statements of business conduct intended for public disclosure including, depending on its relevance for the
enterprise’s activities, information on the enterprise’s policies relating to matters covered by the Guidelines;
b) policies and other codes of conduct to which the enterprise subscribes, their date of adoption and the countries and entities to which such statements apply;
c) its performance in relation to these statements and codes;
d) information on internal audit, risk management and legal compliance systems;
e) information on relationships with workers and other stakeholders.
4. Enterprises should apply high quality standards for accounting, and financial as well as non-financial disclosure, including environmental and social reporting where they exist. The standards or policies under which information is compiled and published should be reported. An annual audit should be conducted by an independent, competent and qualified auditor in order to provide an external and objective assurance to the board and shareholders that the financial statements fairly represent the financial position and performance of the enterprise in all material respects.
Commentary on Disclosure
28. The purpose of this chapter is to encourage improved understanding of the operations of multinational enterprises. Clear and complete information on enterprises is important to a variety of users ranging from shareholders and the financial community to other constituencies such as workers, local communities, special interest groups, governments and society at large. To improve public understanding of enterprises and their interaction with society and the environment, enterprises should be transparent in their operations and responsive to the public’s increasingly sophisticated demands for information.
29. The information highlighted in this chapter addresses disclosure in two areas. The first set of disclosure recommendations is identical to disclosure items outlined in the OECD Principles of Corporate Governance. Their related annotations provide further guidance and the recommendations in the Guidelines should be construed in relation to them. The first set of disclosure recommendations may be supplemented by a second set of disclosure recommendations which enterprises are encouraged to follow. The disclosure recommendations focus mainly on publicly traded enterprises. To the extent that they are deemed applicable in light of the nature, size and location of enterprises, they
should also be a useful tool to improve corporate governance in non-traded enterprises; for example, privately held or State-owned enterprises.
30. Disclosure recommendations are not expected to place unreasonable administrative or cost burdens on enterprises. Nor are enterprises expected to disclose information that may endanger their competitive position unless disclosure is necessary to fully inform the investment decision and to avoid misleading the investor. In order to determine what information should be disclosed at a minimum, the Guidelines use the concept of materiality. Material information can be defined as information whose omission or misstatement could influence the economic decisions taken by users of information.
31. The Guidelines also generally note that information should be prepared and disclosed in accordance with high quality standards of accounting and financial and non-financial disclosure. This significantly improves the ability of investors to monitor the enterprise by providing increased reliability and comparability of reporting, and improved insight into its performance. The annual independent audit recommended by the Guidelines should contribute to an improved control and compliance by the enterprise.
32. Disclosure is addressed in two areas. The first set of disclosure recommendations calls for timely and accurate disclosure on all material matters regarding the corporation, including the financial situation, performance, ownership and governance of the company. Companies are also expected to disclose sufficient information on the remuneration of board members and key executives (either individually or in the aggregate) for investors to properly assess the costs and benefits of remuneration plans and the contribution of incentive schemes, such as stock option schemes, to performance. Related party transactions and material foreseeable risk factors are additional relevant information that should be disclosed, as well as material issues regarding workers and other stakeholders.
33. The Guidelines also encourage a second set of disclosure or communication practices in areas where reporting standards are still evolving such as, for example, social, environmental and risk reporting. This is particularly the case with greenhouse gas emissions, as the scope of their monitoring is expanding to cover direct and indirect, current and future, corporate and product emissions; biodiversity is another example. Many enterprises provide information on a broader set of topics than financial performance and consider disclosure of such information a method by which they can demonstrate a commitment to
socially acceptable practices. In some cases, this second type of disclosure – or communication with the public and with other parties directly affected by the enterprise’s activities – may pertain to entities that extend beyond those covered in the enterprise’s financial accounts. For example, it may also cover information on the activities of subcontractors and suppliers or of joint venture partners. This is particularly appropriate to monitor the transfer of environmentally harmful activities to partners.
34. Many enterprises have adopted measures designed to help them comply with the law and standards of business conduct, and to enhance the transparency of their operations. A growing number of firms have issued voluntary codes of corporate conduct, which are expressions of commitments to ethical values in such areas as environment, human rights, labour standards, consumer protection, or taxation. Specialised management systems have been or are being developed and continue to evolve with the aim of helping them respect these commitments – these involve information systems, operating procedures and training requirements. Enterprises are cooperating with NGOs and intergovernmental organisations in developing reporting standards that enhance enterprises’ ability to communicate how their activities influence sustainable development outcomes (for example, the Global Reporting Initiative).
35. Enterprises are encouraged to provide easy and economical access to published information and to consider making use of information technologies to meet this goal. Information that is made available to users in home markets should also be available to all interested users. Enterprises may take special steps to make information available to communities that do not have access to printed media (for example, poorer communities that are directly affected by the enterprise’s activities).
States have the duty to protect human rights. Enterprises should, within the framework of internationally recognised human rights, the international human rights obligations of the countries in which they operate as well as relevant domestic laws and regulations:
1. Respect human rights, which means they should avoid infringing on the human rights of others and should address adverse human rights impacts with which they are involved.
2. Within the context of their own activities, avoid causing or contributing to adverse human rights impacts and address such impacts when they occur.
3. Seek ways to prevent or mitigate adverse human rights impacts that are directly linked to their business operations, products or services by a business relationship, even if they do not contribute to those impacts.
4. Have a policy commitment to respect human rights.
5. Carry out human rights due diligence as appropriate to their size, the nature and context of operations and the severity of the risks of adverse human rights impacts.
6. Provide for or co-operate through legitimate processes in the remediation of adverse human rights impacts where they identify that they have caused or contributed to these impacts.
Commentary on Human Rights
36. This chapter opens with a chapeau that sets out the framework for the specific recommendations concerning enterprises’ respect for human rights. It draws upon the United Nations Framework for Business and Human Rights ‘Protect, Respect and Remedy’ and is in line with the Guiding Principles for its Implementation.
37. The chapeau and the first paragraph recognise that States have the duty to protect human rights, and that enterprises, regardless of their size,
sector, operational context, ownership and structure, should respect human rights wherever they operate. Respect for human rights is the global standard of expected conduct for enterprises independently of States’ abilities and/or willingness to fulfil their human rights obligations, and does not diminish those obligations.
38. A State’s failure either to enforce relevant domestic laws, or to implement international human rights obligations or the fact that it may act contrary to such laws or international obligations does not diminish the expectation that enterprises respect human rights. In countries where domestic laws and regulations conflict with internationally recognised human rights, enterprises should seek ways to honour them to the fullest extent which does not place them in violation of domestic law, consistent with paragraph 2 of the Chapter on Concepts and Principles.
39. In all cases and irrespective of the country or specific context of enterprises’ operations, reference should be made at a minimum to the internationally recognised human rights expressed in the International Bill of Human Rights, consisting of the Universal Declaration of Human Rights and the main instruments through which it has been codified: the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights, and to the principles concerning fundamental rights set out in the 1998 International Labour Organisation Declaration on Fundamental Principles and Rights at Work.
40. Enterprises can have an impact on virtually the entire spectrum of internationally recognised human rights. In practice, some human rights may be at greater risk than others in particular industries or contexts, and therefore will be the focus of heightened attention. However, situations may change, so all rights should be the subject of periodic review. Depending on circumstances, enterprises may need to consider additional standards. For instance, enterprises should respect the human rights of individuals belonging to specific groups or populations that require particular attention, where they may have adverse human rights impacts on them. In this connection, United Nations instruments have elaborated further on the rights of indigenous peoples; persons belonging to national or ethnic, religious and linguistic minorities; women; children; persons with disabilities; and migrant workers and their families. Moreover, in situations of armed conflict enterprises should respect the standards of international humanitarian law, which can help enterprises avoid the risks of causing or contributing to adverse impacts when operating in such difficult environments.
41. In paragraph 1, addressing actual and potential adverse human rights impacts consists of taking adequate measures for their identification, prevention, where possible, and mitigation of potential human rights impacts, remediation of actual impacts, and accounting for how the adverse human rights impacts are addressed. The term ‘infringing’ refers to adverse impacts that an enterprise may have on the human rights of individuals.
42. Paragraph 2 recommends that enterprises avoid causing or contributing to adverse human rights impacts through their own activities and address such impacts when they occur. ‘Activities’ can include both actions and omissions. Where an enterprise causes or may cause an adverse human rights impact, it should take the necessary steps to cease or prevent the impact. Where an enterprise contributes or may contribute to such an impact, it should take the necessary steps to cease or prevent its contribution and use its leverage to mitigate any remaining impact to the greatest extent possible. Leverage is considered to exist where the enterprise has the ability to effect change in the practices of an entity that cause adverse human rights impacts.
43. Paragraph 3 addresses more complex situations where an enterprise has not contributed to an adverse human rights impact, but that impact is nevertheless directly linked to its operations, products or services by its business relationship with another entity. Paragraph 3 is not intended to shift responsibility from the entity causing an adverse human rights impact to the enterprise with which it has a business relationship. Meeting the expectation in paragraph 3 would entail an enterprise, acting alone or in co-operation with other entities, as appropriate, to use its leverage to influence the entity causing the adverse human rights impact to prevent or mitigate that impact. ‘Business relationships’ include relationships with business partners, entities in its supply chain, and any other non-State or State entity directly linked to its business operations, products or services. Among the factors that will enter into the determination of the appropriate action in such situations are the enterprise’s leverage over the entity concerned, how crucial the relationship is to the enterprise, the severity of the impact, and whether terminating the relationship with the entity itself would have adverse human rights impacts.
44. Paragraph 4 recommends that enterprises express their commitment to respect human rights through a statement of policy that: (i) is approved at the most senior level of the enterprise; (ii) is informed by relevant internal and/or external expertise; (iii) stipulates the enterprise’s human rights expectations of personnel, business partners and other parties directly linked to its operations, products or services; (iv) is publicly
available and communicated internally and externally to all personnel, business partners and other relevant parties; (v) is reflected in operational policies and procedures necessary to embed it throughout the enterprise.
45. Paragraph 5 recommends that enterprises carry out human rights due diligence. The process entails assessing actual and potential human rights impacts, integrating and acting upon the findings, tracking responses as well as communicating how impacts are addressed. Human rights due diligence can be included within broader enterprise risk management systems provided that it goes beyond simply identifying and managing material risks to the enterprise itself to include the risks to rights-holders. It is an on-going exercise, recognising that human rights risks may change over time as the enterprise’s operations and operating context evolve. Complementary guidance on due diligence, including in relation to supply chains, and appropriate responses to risks arising in supply chains are provided under paragraphs A.10 to A.12 of the Chapter on General Policies and their Commentaries.
46. When enterprises identify through their human rights due diligence process or other means that they have caused or contributed to an adverse impact, the Guidelines recommend that enterprises have processes in place to enable remediation. Some situations require co-operation with judicial or State-based non-judicial mechanisms. In others, operational-level grievance mechanisms for those potentially impacted by enterprises’ activities can be an effective means of providing for such processes when they meet the core criteria of: legitimacy, accessibility, predictability, equitability, compatibility with the Guidelines and transparency, and are based on dialogue and engagement with a view to seeking agreed solutions. Such mechanisms can be administered by an enterprise alone or in collaboration with other stakeholders and can be a source of continuous learning. Operational-level grievance mechanisms should not be used to undermine the role of trade unions in addressing labour-related disputes, nor should such mechanisms preclude access to judicial or non-judicial grievance mechanisms, including the National Contact Points under the Guidelines.
Enterprises should, within the framework of applicable law, regulations and prevailing labour relations and employment practices and applicable international labour standards:
1. a) Respect the right of workers employed by the multinational enterprise to establish or join trade unions and representative organisations of their own choosing.
b) Respect the right of workers employed by the multinational enterprise to have trade unions and representative organisations of their own choosing recognised for the purpose of collective bargaining, and engage in constructive negotiations, either individually or through employers' associations, with such representatives with a view to reaching agreements on terms and conditions of employment.
c) Contribute to the effective abolition of child labour, and take immediate and effective measures to secure the prohibition and elimination of the worst forms of child labour as a matter of urgency.
d) Contribute to the elimination of all forms of forced or compulsory labour and take adequate steps to ensure that forced or compulsory labour does not exist in their operations.
e) Be guided throughout their operations by the principle of equality of opportunity and treatment in employment and not discriminate against their workers with respect to employment or occupation on such grounds as race, colour, sex, religion, political opinion, national extraction or social origin, or other status, unless selectivity concerning worker characteristics furthers established governmental policies which specifically promote greater equality of employment opportunity or relates to the inherent requirements of a job.
2. a) Provide such facilities to workers’ representatives as may be necessary to assist in the development of effective collective agreements.
b) Provide information to workers’ representatives which is needed for meaningful negotiations on conditions of employment.
c) Provide information to workers and their representatives which enables them to obtain a true and fair view of the performance of the entity or, where appropriate, the enterprise as a whole.
3. Promote consultation and co-operation between employers and workers and their representatives on matters of mutual concern.
4. a) Observe standards of employment and industrial relations not less favourable than those observed by comparable employers in the host country.
b) When multinational enterprises operate in developing countries, where comparable employers may not exist, provide the best possible wages, benefits and conditions of work, within the framework of government policies. These should be related to the economic position of the enterprise, but should be at least adequate to satisfy the basic needs of the workers and their families.
c) Take adequate steps to ensure occupational health and safety in their operations.
5. In their operations, to the greatest extent practicable, employ local workers and provide training with a view to improving skill levels, in co-operation with worker representatives and, where appropriate, relevant governmental authorities.
6. In considering changes in their operations which would have major employment effects, in particular in the case of the closure of an entity involving collective lay-offs or dismissals, provide reasonable notice of such changes to representatives of the workers in their employment and their organisations, and, where appropriate, to the relevant governmental authorities, and co-operate with the worker representatives and appropriate governmental authorities so as to mitigate to the maximum extent practicable adverse effects. In light of the specific circumstances of each case, it would be appropriate if management were able to give such notice prior to the final decision being taken. Other means may also be employed to provide meaningful co-operation to mitigate the effects of such decisions.
7. In the context of bona fide negotiations with workers’ representatives on conditions of employment, or while workers are exercising a right to organise, not threaten to transfer the whole or part of an operating unit from the country concerned nor transfer workers from the enterprises'
component entities in other countries in order to influence unfairly those negotiations or to hinder the exercise of a right to organise.
8. Enable authorised representatives of the workers in their employment to negotiate on collective bargaining or labour-management relations issues and allow the parties to consult on matters of mutual concern with representatives of management who are authorised to take decisions on these matters.
Commentary on Employment and Industrial Relations
47. This chapter opens with a chapeau that includes a reference to “applicable” law and regulations, which is meant to acknowledge the fact that multinational enterprises, while operating within the jurisdiction of particular countries, may be subject to national and international levels of regulation of employment and industrial relations matters. The terms “prevailing labour relations” and “employment practices” are sufficiently broad to permit a variety of interpretations in light of different national circumstances – for example, different bargaining options provided for workers under national laws and regulations.
48. The International Labour Organisation (ILO) is the competent body to set and deal with international labour standards, and to promote fundamental rights at work as recognised in its 1998 Declaration on Fundamental Principles and Rights at Work. The Guidelines, as a non-binding instrument, have a role to play in promoting observance of these standards and principles among multinational enterprises. The provisions of the Guidelines chapter echo relevant provisions of the 1998 Declaration, as well as the 1977 ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy, last revised in 2006 (the ILO MNE Declaration). The ILO MNE Declaration sets out principles in the fields of employment, training, working conditions, and industrial relations, while the OECD Guidelines cover all major aspects of corporate behaviour. The OECD Guidelines and the ILO MNE Declaration refer to the behaviour expected from enterprises and are intended to parallel and not conflict with each other. The ILO MNE Declaration can therefore be of use in understanding the Guidelines to the extent that it is of a greater degree of elaboration. However, the responsibilities for the follow-up procedures under the ILO MNE Declaration and the Guidelines are institutionally separate.
49. The terminology used in Chapter V is consistent with that used in the ILO MNE Declaration. The use of the terms “workers employed by the
multinational enterprise” and “workers in their employment” is intended to have the same meaning as in the ILO MNE Declaration. These terms refer to workers who are “in an employment relationship with the multinational enterprise”. Enterprises wishing to understand the scope of their responsibility under Chapter V will find useful guidance for determining the existence of an employment relationship in the context of the Guidelines in the non-exhaustive list of indicators set forth in ILO Recommendation 198 of 2006, paragraphs 13 (a) and (b). In addition, it is recognised that working arrangements change and develop over time and that enterprises are expected to structure their relationships with workers so as to avoid supporting, encouraging or participating in disguised employment practices. A disguised employment relationship occurs when an employer treats an individual as other than an employee in a manner that hides his or her true legal status.
50. These recommendations do not interfere with true civil and commercial relationships, but rather seek to ensure that individuals in an employment relationship have the protection that is due to them in the context of the Guidelines. It is recognised that in the absence of an employment relationship, enterprises are nevertheless expected to act in accordance with the risk-based due diligence and supply chain recommendations in paragraphs A.10 to A.13 of Chapter II on General Policies.
51. Paragraph 1 of this chapter is designed to echo all four fundamental principles and rights at work which are contained in the ILO’s 1998 Declaration, namely the freedom of association and right to collective bargaining, the effective abolition of child labour, the elimination of all forms of forced or compulsory labour, and non-discrimination in employment and occupation. These principles and rights have been developed in the form of specific rights and obligations in ILO Conventions recognised as fundamental.
52. Paragraph 1c) recommends that multinational enterprises contribute to the effective abolition of child labour in the sense of the ILO 1998 Declaration and ILO Convention 182 concerning the worst forms of child labour. Long-standing ILO instruments on child labour are Convention 138 and Recommendation 146 (both adopted in 1973) concerning minimum ages for employment. Through their labour management practices, their creation of high-quality, well-paid jobs and their contribution to economic growth, multinational enterprises can play a positive role in helping to address the root causes of poverty in general and of child labour in particular. It is important to acknowledge and encourage the role of multinational enterprises in contributing to the search for a lasting solution to the problem of child labour. In this
regard, raising the standards of education of children living in host countries is especially noteworthy.
53. Paragraph 1d) recommends that enterprises contribute to the elimination of all forms of forced and compulsory labour, another principle derived from the 1998 ILO Declaration. The reference to this core labour right is based on the ILO Conventions 29 of 1930 and 105 of 1957. Convention 29 requests that governments “suppress the use of forced or compulsory labour in all its forms within the shortest possible period”, while Convention 105 requests of them to “suppress and not to make use of any form of forced or compulsory labour” for certain enumerated purposes (for example, as a means of political coercion or labour discipline), and “to take effective measures to secure [its] immediate and complete abolition”. At the same time, it is understood that the ILO is the competent body to deal with the difficult issue of prison labour, in particular when it comes to the hiring-out of prisoners to (or their placing at the disposal of) private individuals, companies or associations.
54. The reference to the principle of non-discrimination with respect to employment and occupation in paragraph 1e is considered to apply to such terms and conditions as hiring, job assignment, discharge, pay and benefits, promotion, transfer or relocation, termination, training and retirement. The list of non-permissible grounds for discrimination which is taken from ILO Convention 111 of 1958, the Maternity Protection Convention 183 of 2000, Employment (Disabled Persons) Convention 159 of 1983, the Older Workers Recommendation 162 of 1980 and the HIV and AIDS at Work Recommendation 200 of 2010, considers that any distinction, exclusion or preference on these grounds is in violation of the Conventions, Recommendations and Codes. The term “other status” for the purposes of the Guidelines refers to trade union activity and personal characteristics such as age, disability, pregnancy, marital status, sexual orientation, or HIV status. Consistent with the provisions in paragraph 1e, enterprises are expected to promote equal opportunities for women and men with special emphasis on equal criteria for selection, remuneration, and promotion, and equal application of those criteria, and prevent discrimination or dismissals on the grounds of marriage, pregnancy or parenthood.
55. In paragraph 2c) of this chapter, information provided by companies to their workers and their representatives is expected to provide a “true and fair view” of performance. It relates to the following: the structure of the enterprise, its economic and financial situation and prospects, employment trends, and expected substantial changes in operations, taking into account legitimate requirements of business confidentiality.
Considerations of business confidentiality may mean that information on certain points may not be provided, or may not be provided without safeguards.
56. The reference to consultative forms of worker participation in paragraph 3 of the Chapter is taken from ILO Recommendation 94 of 1952 concerning Consultation and Co-operation between Employers and Workers at the Level of the Undertaking. It also conforms to a provision contained in the ILO MNE Declaration. Such consultative arrangements should not substitute for workers’ right to bargain over terms and conditions of employment. A recommendation on consultative arrangements with respect to working arrangements is also part of paragraph 8.
57. In paragraph 4, employment and industrial relations standards are understood to include compensation and working-time arrangements. The reference to occupational health and safety implies that multinational enterprises are expected to follow prevailing regulatory standards and industry norms to minimise the risk of accidents and injury to health arising out of, linked with, or occurring in, the course of employment. This encourages enterprises to work to raise the level of performance with respect to occupational health and safety in all parts of their operation even where this may not be formally required by existing regulations in countries in which they operate. It also encourages enterprises to respect workers’ ability to remove themselves from a work situation when there is reasonable justification to believe that it presents an imminent and serious risk to health or safety. Reflecting their importance and complementarities among related recommendations, health and safety concerns are echoed elsewhere in the Guidelines, most notably in chapters on Consumer Interests and the Environment. The ILO Recommendation No. 194 of 2002 provides an indicative list of occupational diseases as well as codes of practice and guides which can be taken into account by enterprises for implementing this recommendation of the Guidelines.
58. The recommendation in paragraph 5 of the chapter encourages MNEs to recruit an adequate workforce share locally, including managerial personnel, and to provide training to them. Language in this paragraph on training and skill levels complements the text in paragraph A.4 of the General Policies chapter on encouraging human capital formation. The reference to local workers complements the text encouraging local capacity building in paragraph A.3 of the General Policies chapter. In accordance with the ILO Human Resources Development Recommendation 195 of 2004, enterprises are also encouraged to invest, to the greatest extent practicable, in training and lifelong learning while
ensuring equal opportunities to training for women and other vulnerable groups, such as youth, low-skilled people, people with disabilities, migrants, older workers, and indigenous peoples.
59. Paragraph 6 recommends that enterprises provide reasonable notice to the representatives of workers and relevant government authorities, of changes in their operations which would have major effects upon the livelihood of their workers, in particular the closure of an entity involving collective layoffs or dismissals. As stated therein, the purpose of this provision is to afford an opportunity for co-operation to mitigate the effects of such changes. This is an important principle that is widely reflected in the industrial relations laws and practices of adhering countries, although the approaches taken to ensuring an opportunity for meaningful co-operation are not identical in all adhering countries. The paragraph also notes that it would be appropriate if, in light of specific circumstances, management were able to give such notice prior to the final decision. Indeed, notice prior to the final decision is a feature of industrial relations laws and practices in a number of adhering countries. However, it is not the only means to ensure an opportunity for meaningful co-operation to mitigate the effects of such decisions, and the laws and practices of other adhering countries provide for other means such as defined periods during which consultations must be undertaken before decisions may be implemented.
Enterprises should, within the framework of laws, regulations and administrative practices in the countries in which they operate, and in consideration of relevant international agreements, principles, objectives, and standards, take due account of the need to protect the environment, public health and safety, and generally to conduct their activities in a manner contributing to the wider goal of sustainable development. In particular, enterprises should:
1. Establish and maintain a system of environmental management appropriate to the enterprise, including:
a) collection and evaluation of adequate and timely information regarding the environmental, health, and safety impacts of their activities;
b) establishment of measurable objectives and, where appropriate, targets for improved environmental performance and resource utilisation, including periodically reviewing the continuing relevance of these objectives; where appropriate, targets should be consistent with relevant national policies and international environmental commitments; and
c) regular monitoring and verification of progress toward environmental, health, and safety objectives or targets.
2. Taking into account concerns about cost, business confidentiality, and the protection of intellectual property rights:
a) provide the public and workers with adequate, measureable and verifiable (where applicable) and timely information on the potential environment, health and safety impacts of the activities of the enterprise, which could include reporting on progress in improving environmental performance; and
b) engage in adequate and timely communication and consultation with the communities directly affected by the environmental, health and safety policies of the enterprise and by their implementation.
3. Assess, and address in decision-making, the foreseeable environmental, health, and safety-related impacts associated with the processes, goods and services of the enterprise over their full life cycle with a view to avoiding or, when unavoidable, mitigating them. Where these proposed activities may have significant environmental, health, or safety impacts, and where they are subject to a decision of a competent authority, prepare an appropriate environmental impact assessment.
4. Consistent with the scientific and technical understanding of the risks, where there are threats of serious damage to the environment, taking also into account human health and safety, not use the lack of full scientific certainty as a reason for postponing cost-effective measures to prevent or minimise such damage.
5. Maintain contingency plans for preventing, mitigating, and controlling serious environmental and health damage from their operations, including accidents and emergencies; and mechanisms for immediate reporting to the competent authorities.
6. Continually seek to improve corporate environmental performance, at the level of the enterprise and, where appropriate, of its supply chain, by encouraging such activities as:
a) adoption of technologies and operating procedures in all parts of the enterprise that reflect standards concerning environmental performance in the best performing part of the enterprise;
b) development and provision of products or services that have no undue environmental impacts; are safe in their intended use; reduce greenhouse gas emissions; are efficient in their consumption of energy and natural resources; can be reused, recycled, or disposed of safely;
c) promoting higher levels of awareness among customers of the environmental implications of using the products and services of the enterprise, including, by providing accurate information on their products (for example, on greenhouse gas emissions, biodiversity, resource efficiency, or other environmental issues); and
d) exploring and assessing ways of improving the environmental performance of the enterprise over the longer term, for instance by developing strategies for emission reduction, efficient resource utilisation and recycling, substitution or reduction of use of toxic substances, or strategies on biodiversity.
7. Provide adequate education and training to workers in environmental health and safety matters, including the handling of hazardous materials and the prevention of environmental accidents, as well as more general environmental management areas, such as environmental impact assessment procedures, public relations, and environmental technologies.
8. Contribute to the development of environmentally meaningful and economically efficient public policy, for example, by means of partnerships or initiatives that will enhance environmental awareness and protection.
Commentary on the Environment
60. The text of the Environment Chapter broadly reflects the principles and objectives contained in the Rio Declaration on Environment and Development, in Agenda 21 (within the Rio Declaration). It also takes into account the (Aarhus) Convention on Access to Information, Public Participation in Decision-making, and Access to Justice in Environmental Matters and reflects standards contained in such instruments as the ISO Standard on Environmental Management Systems.
61. Sound environmental management is an important part of sustainable development, and is increasingly being seen as both a business responsibility and a business opportunity. Multinational enterprises have a role to play in both respects. Managers of these enterprises should therefore give appropriate attention to environmental issues within their business strategies. Improving environmental performance requires a commitment to a systematic approach and to continual improvement of the system. An environmental management system provides the internal framework necessary to control an enterprise’s environmental impacts and to integrate environmental considerations into business operations. Having such a system in place should help to assure shareholders, employees and the community that the enterprise is actively working to protect the environment from the impacts of its activities.
62. In addition to improving environmental performance, instituting an environmental management system can provide economic benefits to companies through reduced operating and insurance costs, improved energy and resource conservation, reduced compliance and liability charges, improved access to capital and skills, improved customer satisfaction, and improved community and public relations.
63. In the context of these Guidelines, “sound environmental management” should be interpreted in its broadest sense, embodying activities aimed at controlling both direct and indirect environmental impacts of enterprise activities over the long-term, and involving both pollution control and resource management elements.
64. In most enterprises, an internal control system is needed to manage the enterprise’s activities. The environmental part of this system may include such elements as targets for improved performance and regular monitoring of progress towards these targets.
65. Information about the activities of enterprises and about their relationships with sub-contractors and their suppliers, and associated environmental impacts is an important vehicle for building confidence with the public. This vehicle is most effective when information is provided in a transparent manner and when it encourages active consultation with stakeholders such as employees, customers, suppliers, contractors, local communities and with the public-at-large so as to promote a climate of long-term trust and understanding on environmental issues of mutual interest. Reporting and communication are particularly appropriate where scarce or at risk environmental assets are at stake either in a regional, national or international context; reporting standards such as the Global Reporting Initiative provide useful references.
66. In providing accurate information on their products, enterprises have several options such as voluntary labelling or certification schemes. In using these instruments enterprises should take due account of their social and economic effects on developing countries and of existing internationally recognised standards.
67. Normal business activity can involve the ex ante assessment of the potential environmental impacts associated with the enterprise’s activities. Enterprises often carry out appropriate environmental impact assessments, even if they are not required by law. Environmental assessments made by the enterprise may contain a broad and forward-looking view of the potential impacts of an enterprise’s activities and of activities of sub-contractors and suppliers, addressing relevant impacts and examining alternatives and mitigation measures to avoid or redress adverse impacts. The Guidelines also recognise that multinational enterprises have certain responsibilities in other parts of the product life cycle.
68. Several instruments already adopted by countries adhering to the Guidelines, including Principle 15 of the Rio Declaration on Environment and Development, enunciate a “precautionary approach”.
None of these instruments is explicitly addressed to enterprises, although enterprise contributions are implicit in all of them.
69. The basic premise of the Guidelines is that enterprises should act as soon as possible, and in a proactive way, to avoid, for instance, serious or irreversible environmental damages resulting from their activities. However, the fact that the Guidelines are addressed to enterprises means that no existing instrument is completely adequate for expressing this recommendation. The Guidelines therefore draw upon, but do not completely mirror, any existing instrument.
70. The Guidelines are not intended to reinterpret any existing instruments or to create new commitments or precedents on the part of governments – they are intended only to recommend how the precautionary approach should be implemented at the level of enterprises. Given the early stage of this process, it is recognised that some flexibility is needed in its application, based on the specific context in which it is carried out. It is also recognised that governments determine the basic framework in this field, and have the responsibility to consult periodically with stakeholders on the most appropriate ways forward.
71. The Guidelines also encourage enterprises to work to raise the level of environmental performance in all parts of their operations, even where this may not be formally required by existing practice in the countries in which they operate. In this regard, enterprises should take due account of their social and economic effects on developing countries.
72. For example, multinational enterprises often have access to existing and innovative technologies or operating procedures which could, if applied, help raise environmental performance overall. Multinational enterprises are frequently regarded as leaders in their respective fields, so the potential for a “demonstration effect” on other enterprises should not be overlooked. Ensuring that the environment of the countries in which multinational enterprises operate also benefit from available and innovative technologies and practices, is an important way of building support for international investment activities more generally.
73. Enterprises have an important role to play in the training and education of their employees with regard to environmental matters. They are encouraged to discharge this responsibility in as broad a manner as possible, especially in areas directly related to human health and safety.
VII. Combating Bribery, Bribe Solicitation and Extortion
Enterprises should not, directly or indirectly, offer, promise, give, or demand a bribe or other undue advantage to obtain or retain business or other improper advantage. Enterprises should also resist the solicitation of bribes and extortion. In particular, enterprises should:
1. Not offer, promise or give undue pecuniary or other advantage to public officials or the employees of business partners. Likewise, enterprises should not request, agree to or accept undue pecuniary or other advantage from public officials or the employees of business partners. Enterprises should not use third parties such as agents and other intermediaries, consultants, representatives, distributors, consortia, contractors and suppliers and joint venture partners for channelling undue pecuniary or other advantages to public officials, or to employees of their business partners or to their relatives or business associates.
2. Develop and adopt adequate internal controls, ethics and compliance programmes or measures for preventing and detecting bribery, developed on the basis of a risk assessment addressing the individual circumstances of an enterprise, in particular the bribery risks facing the enterprise (such as its geographical and industrial sector of operation). These internal controls, ethics and compliance programmes or measures should include a system of financial and accounting procedures, including a system of internal controls, reasonably designed to ensure the maintenance of fair and accurate books, records, and accounts, to ensure that they cannot be used for the purpose of bribing or hiding bribery. Such individual circumstances and bribery risks should be regularly monitored and re-assessed as necessary to ensure the enterprise’s internal controls, ethics and compliance programme or measures are adapted and continue to be effective, and to mitigate the risk of enterprises becoming complicit in bribery, bribe solicitation and extortion.
3. Prohibit or discourage, in internal company controls, ethics and compliance programmes or measures, the use of small facilitation
payments, which are generally illegal in the countries where they are made, and, when such payments are made, accurately record these in books and financial records.
4. Ensure, taking into account the particular bribery risks facing the enterprise, properly documented due diligence pertaining to the hiring, as well as the appropriate and regular oversight of agents, and that remuneration of agents is appropriate and for legitimate services only. Where relevant, a list of agents engaged in connection with transactions with public bodies and State-owned enterprises should be kept and made available to competent authorities, in accordance with applicable public disclosure requirements.
5. Enhance the transparency of their activities in the fight against bribery, bribe solicitation and extortion. Measures could include making public commitments against bribery, bribe solicitation and extortion, and disclosing the management systems and the internal controls, ethics and compliance programmes or measures adopted by enterprises in order to honour these commitments. Enterprises should also foster openness and dialogue with the public so as to promote its awareness of and co-operation with the fight against bribery, bribe solicitation and extortion.
6. Promote employee awareness of and compliance with company policies and internal controls, ethics and compliance programmes or measures against bribery, bribe solicitation and extortion through appropriate dissemination of such policies, programmes or measures and through training programmes and disciplinary procedures.
7. Not make illegal contributions to candidates for public office or to political parties or to other political organisations. Political contributions should fully comply with public disclosure requirements and should be reported to senior management.
Commentary on Combating Bribery, Bribe Solicitation and Extortion
74. Bribery and corruption are damaging to democratic institutions and the governance of corporations. They discourage investment and distort international competitive conditions. In particular, the diversion of funds through corrupt practices undermines attempts by citizens to achieve higher levels of economic, social and environmental welfare, and it impedes efforts to reduce poverty. Enterprises have an important role to play in combating these practices.
75. Propriety, integrity and transparency in both the public and private domains are key concepts in the fight against bribery, bribe solicitation and extortion. The business community, non-governmental organisations, governments and inter-governmental organisations have all co-operated to strengthen public support for anticorruption measures and to enhance transparency and public awareness of the problems of corruption and bribery. The adoption of appropriate corporate governance practices is also an essential element in fostering a culture of ethics within enterprises.
76. The Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the Anti-Bribery Convention)entered into force on 15 February 1999. The Anti-Bribery Convention,along with the 2009 Recommendation for Further Combating Bribery of Foreign Public Officials in International Business Transactions (the 2009 Anti-Bribery Recommendation), the 2009 Recommendation on Tax Measures for Further Combating Bribery of Foreign Public Officials in International Business Transactions, and the 2006 Recommendation on Bribery and Officially Supported Export Credits, are the core OECD instruments which target the offering side of the bribery transaction. They aim to eliminate the “supply” of bribes to foreign public officials, with each country taking responsibility for the activities of its enterprises and what happens within its own jurisdiction.6 A programme of rigorous and systematic monitoring of countries’ implementation of the Anti-Bribery Convention has been established to promote the full implementation of these instruments.
77. The 2009 Anti-Bribery Recommendation recommends in particular that governments encourage their enterprises to develop and adopt adequate internal controls, ethics and compliance programmes or measures for the purpose of preventing and detecting foreign bribery, taking into account the Good Practice Guidance on Internal Controls, Ethics and
6. For the purposes of the Convention, a “bribe” is defined as an “…offer, promise, or giv(ing) of any undue pecuniary or other advantage, whether directly or through intermediaries, to a foreign public official, for that official or for a third party, in order that the official act or refrain from acting in relation to the performance of official duties, in order to obtain or retain business or other improper advantage in the conduct of international business”. The Commentaries to the Convention (paragraph 9) clarify that “small ‘facilitation’ payments do not constitute payments made ‘to obtain or retain business or other improper advantage’ within the meaning of paragraph 1 and, accordingly, are also not an offence. Such payments, which, in some countries, are made to induce public officials to perform their functions, such as issuing licenses or permits, are generally illegal in the foreign country concerned. Other countries can and should address this corrosive phenomenon by such means as support for programmes of good governance. …”.
Compliance, included as Annex II to the 2009 Anti-Bribery Recommendation. This Good Practice Guidance is addressed to enterprises as well as business organisations and professional associations, and highlights good practices for ensuring the effectiveness of their internal controls, ethics and compliance programmes or measures to prevent and detect foreign bribery.
78. Private sector and civil society initiatives also help enterprises to design and implement effective anti-bribery policies.
79. The United Nations Convention against Corruption (UNCAC), which entered into force on 14 December 2005, sets out a broad range of standards, measures and rules to fight corruption. Under the UNCAC,States Parties are required to prohibit their officials from receiving bribes and their enterprises from bribing domestic public officials, as well as foreign public officials and officials of public international organisations, and to consider disallowing private to private bribery. The UNCAC and the Anti-Bribery Convention are mutually supporting and complementary.
80. To address the demand side of bribery, good governance practices are important elements to prevent enterprises from being asked to pay bribes. Enterprises can support collective action initiatives on resisting bribe solicitation and extortion. Both home and host governments should assist enterprises confronted with solicitation of bribes and with extortion. The Good Practice Guidance on Specific Articles of the Convention in Annex I of the 2009 Anti-Bribery Recommendation states that the Anti-Bribery Convention should be implemented in such a way that it does not provide a defence or exception where the foreign public official solicits a bribe. Furthermore, the UNCAC requires the criminalisation of bribe solicitation by domestic public officials.
When dealing with consumers, enterprises should act in accordance with fair business, marketing and advertising practices and should take all reasonable steps to ensure the quality and reliability of the goods and services that they provide. In particular, they should:
1. Ensure that the goods and services they provide meet all agreed or legally required standards for consumer health and safety, including those pertaining to health warnings and safety information.
2. Provide accurate, verifiable and clear information that is sufficient to enable consumers to make informed decisions, including information on the prices and, where appropriate, content, safe use, environmental attributes, maintenance, storage and disposal of goods and services. Where feasible this information should be provided in a manner that facilitates consumers’ ability to compare products.
3. Provide consumers with access to fair, easy to use, timely and effective non-judicial dispute resolution and redress mechanisms, without unnecessary cost or burden.
4. Not make representations or omissions, nor engage in any other practices, that are deceptive, misleading, fraudulent or unfair.
5. Support efforts to promote consumer education in areas that relate to their business activities, with the aim of, inter alia, improving the ability of consumers to: i) make informed decisions involving complex goods, services and markets, ii) better understand the economic, environmental and social impact of their decisions and iii) support sustainable consumption.
6. Respect consumer privacy and take reasonable measures to ensure the security of personal data that they collect, store, process or disseminate.
7. Co-operate fully with public authorities to prevent and combat deceptive marketing practices (including misleading advertising and commercial fraud) and to diminish or prevent serious threats to public health and safety or to the environment deriving from the consumption, use or disposal of their goods and services.
8. Take into consideration, in applying the above principles, i) the needs of vulnerable and disadvantaged consumers and ii) the specific challenges that e-commerce may pose for consumers.
Commentary on Consumer Interests
81. The chapter on consumer interests of the OECD Guidelines for Multinational Enterprises draws on the work of the OECD Committee on Consumer Policy and the Committee on Financial Markets, as well as the work of other international organisations, including the International Chamber of Commerce, the International Organization for Standardization and the United Nations (i.e., the UN Guidelines on Consumer Policy, as expanded in 1999).
82. The chapter recognises that consumer satisfaction and related interests constitute a fundamental basis for the successful operation of enterprises. It also recognises that consumer markets for goods and services have undergone major transformation over time. Regulatory reform, more open global markets, the development of new technologies and the growth in consumer services have been key agents of change, providing consumers with greater choice and the other benefits which derive from more open competition. At the same time, the pace of change and increased complexity of many markets have generally made it more difficult for consumers to compare and assess goods and services. Moreover, consumer demographics have also changed over time. Children are becoming increasingly significant forces in the market, as are the growing number of older adults. While consumers are better educated overall, many still lack the arithmetic and literacy skills that are required in today’s more complex, information-intensive marketplace. Further, many consumers are increasingly interested in knowing the position and activities of enterprises on a broad range of economic, social and environmental issues, and in taking these into account when choosing goods and services.
83. The chapeau calls on enterprises to apply fair business, marketing and advertising practices and to ensure the quality and reliability of the products that they provide. These principles, it is noted, apply to both goods and services.
84. Paragraph 1 underscores the importance for enterprises to adhere to required health and safety standards and the importance for them to provide consumers with adequate health and safety information on their products.
85. Paragraph 2 concerns information disclosure. It calls for enterprises to provide information which is sufficient for consumers to make informed decisions. This would include information on the financial risks associated with products, where relevant. Furthermore, in some instances enterprises are legally required to provide information in a manner that enables consumers to make direct comparisons of goods and services (for example, unit pricing). In the absence of direct legislation, enterprises are encouraged to present information, when dealing with consumers, in a way that facilitates comparisons of goods and services and enables consumers to easily determine what the total cost of a product will be. It should be noted that what is considered to be “sufficient” can change over time and enterprises should be responsive to these changes. Any product and environmental claims that enterprises make should be based on adequate evidence and, as applicable, proper tests. Given consumers’ growing interest in environmental issues and sustainable consumption, information should be provided, as appropriate, on the environmental attributes of products. This could include information on the energy efficiency and the degree of recyclability of products and, in the case of food products, information on agricultural practices.
86. Business conduct is increasingly considered by consumers when making their purchasing decisions. Enterprises are therefore encouraged to make information available on initiatives they have taken to integrate social and environmental concerns into their business operations and to otherwise support sustainable consumption. Chapter III of the Guidelines on Disclosure is relevant in this regard. Enterprises are there encouraged to communicate value statements or statements of business conduct to the public, including information on the social, ethical and environmental policies of the enterprise and other codes of conduct to which the company subscribes. Enterprises are encouraged to make this information available in plain language and in a format that is appealing to consumers. Growth in the number of enterprises reporting in these areas and targeting information to consumers would be welcome.
87. Paragraph 3 reflects language that is used in the 2007 Council Recommendation on Consumer Dispute Resolution and Redress. The Recommendation establishes a framework for developing effective approaches to address consumer complaints, including a series of actions that industry can take in this respect. It is noted that the mechanisms that many enterprises have established to resolve consumer disputes have helped increase consumer confidence and consumer satisfaction. These mechanisms can provide more practicable solutions to complaints than legal actions, which can be expensive, difficult and time consuming for all the parties involved. For these non-judicial
mechanisms to be effective, however, consumers need to be made aware of their existence and would benefit from guidance on how to file complaints, especially when claims involve cross-border or multi-dimensional transactions.
88. Paragraph 4 concerns deceptive, misleading, fraudulent and other unfair commercial practices. Such practices can distort markets, at the expense of both consumers and responsible enterprises and should be avoided.
89. Paragraph 5 concerns consumer education, which has taken on greater importance with the growing complexity of many markets and products. Governments, consumer organisations and many enterprises have recognised that this is a shared responsibility and that they can play important roles in this regard. The difficulties that consumers have experienced in evaluating complex products in financial and other areas have underscored the importance for stakeholders to work together to promote education aimed at improving consumer decision-making.
90. Paragraph 6 concerns personal data. The increasing collection and use of personal data by enterprises, fuelled in part by the Internet and technological advances, has highlighted the importance of protecting personal data against consumer privacy violations, including security breaches.
91. Paragraph 7 underscores the importance of enterprises to work with public authorities to help prevent and combat deceptive marketing practices more effectively. Co-operation is also called for to diminish or prevent threats to public health and safety and to the environment. This includes threats associated with the disposal of goods, as well as their consumption and use. This reflects recognition of the importance of considering the entire life-cycle of products.
92. Paragraph 8 calls on enterprises to take the situations of vulnerable and disadvantaged consumers into account when they market goods and services. Disadvantaged or vulnerable consumers refer to particular consumers or categories of consumers, who because of personal characteristics or circumstances (like age, mental or physical capacity, education, income, language or remote location) may meet particular difficulties in operating in today’s information-intensive, globalised markets. The paragraph also highlights the growing importance of mobile and other forms of e-commerce in global markets. The benefits that such commerce provides are significant and growing. Governments have spent considerable time examining ways to ensure that consumers are afforded transparent and effective protection that is not less in the case of e-commerce than the level of protection afforded in more traditional forms of commerce.
1. Endeavour to ensure that their activities are compatible with the science and technology (S&T) policies and plans of the countries in which they operate and as appropriate contribute to the development of local and national innovative capacity.
2. Adopt, where practicable in the course of their business activities, practices that permit the transfer and rapid diffusion of technologies and know-how, with due regard to the protection of intellectual property rights.
3. When appropriate, perform science and technology development work in host countries to address local market needs, as well as employ host country personnel in an S&T capacity and encourage their training, taking into account commercial needs.
4. When granting licenses for the use of intellectual property rights or when otherwise transferring technology, do so on reasonable terms and conditions and in a manner that contributes to the long term sustainable development prospects of the host country.
5. Where relevant to commercial objectives, develop ties with local universities, public research institutions, and participate in co-operative research projects with local industry or industry associations.
Commentary on Science and Technology
93. In a knowledge-based and globalised economy where national borders matter less, even for small or domestically oriented enterprises, the ability to access and utilise technology and know-how is essential for improving enterprise performance. Such access is also important for the realisation of the economy-wide effects of technological progress, including productivity growth and job creation, within the context of sustainable development. Multinational enterprises are the main conduit of technology transfer across borders. They contribute to the national
innovative capacity of their host countries by generating, diffusing, and even enabling the use of new technologies by domestic enterprises and institutions. The R&D activities of MNEs, when well connected to the national innovation system, can help enhance the economic and social progress in their host countries. In turn, the development of a dynamic innovation system in the host country expands commercial opportunities for MNEs.
94. The chapter thus aims to promote, within the limits of economic feasibility, competitiveness concerns and other considerations, the diffusion by multinational enterprises of the fruits of research and development activities among the countries where they operate, contributing thereby to the innovative capacities of host countries. In this regard, fostering technology diffusion can include the commercialisation of products which imbed new technologies, licensing of process innovations, hiring and training of S&T personnel and development of R&D co-operative ventures. When selling or licensing technologies, not only should the terms and conditions negotiated be reasonable, but MNEs may want to consider the long-term developmental, environmental and other impacts of technologies for the home and host country. In their activities, multinational enterprises can establish and improve the innovative capacity of their international subsidiaries and subcontractors. In addition, MNEs can call attention to the importance of local scientific and technological infrastructure, both physical and institutional. In this regard, MNEs can usefully contribute to the formulation by host country governments of policy frameworks conducive to the development of dynamic innovation systems.
1. Carry out their activities in a manner consistent with all applicable competition laws and regulations, taking into account the competition laws of all jurisdictions in which the activities may have anti-competitive effects.
2. Refrain from entering into or carrying out anti-competitive agreements among competitors, including agreements to:
a) fix prices;
b) make rigged bids (collusive tenders);
c) establish output restrictions or quotas; or
d) share or divide markets by allocating customers, suppliers, territories or lines of commerce.
3. Co-operate with investigating competition authorities by, among other things and subject to applicable law and appropriate safeguards, providing responses as promptly and completely as practicable to requests for information, and considering the use of available instruments, such as waivers of confidentiality where appropriate, to promote effective and efficient co-operation among investigating authorities.
4. Regularly promote employee awareness of the importance of compliance with all applicable competition laws and regulations, and, in particular, train senior management of the enterprise in relation to competition issues.
Commentary on Competition
95. These recommendations emphasise the importance of competition laws and regulations to the efficient operation of both domestic and international markets and reaffirm the importance of compliance with
those laws and regulations by domestic and multinational enterprises. They also seek to ensure that all enterprises are aware of developments concerning the scope, remedies and sanctions of competition laws and the extent of co-operation among competition authorities. The term “competition” law is used to refer to laws, including both “antitrust” and “antimonopoly” laws, that variously prohibit: a) anti-competitive agreements; b) the abuse of market power or of dominance; c) the acquisition of market power or dominance by means other than efficient performance; or d) the substantial lessening of competition or the significant impeding of effective competition through mergers or acquisitions.
96. In general, competition laws and policies prohibit: a) hard core cartels; b) other anti-competitive agreements; c) anti-competitive conduct that exploits or extends market dominance or market power; and d) anti-competitive mergers and acquisitions. Under the 1998 Recommendation of the OECD Council Concerning Effective Action Against Hard Core Cartels, C(98)35/FINAL, the anticompetitive agreements referred to in sub a) constitute hard core cartels, but the Recommendation incorporates differences in member countries’ laws, including differences in the laws’ exemptions or provisions allowing for an exception or authorisation for activity that might otherwise be prohibited. The recommendations in these Guidelines do not suggest that enterprises should forego availing themselves of such legally available exemptions or provisions. The categories sub b) and c) are more general because the effects of other kinds of agreements and of unilateral conduct are more ambiguous, and there is less consensus on what should be considered anti-competitive.
97. The goal of competition policy is to contribute to overall welfare and economic growth by promoting market conditions in which the nature, quality, and price of goods and services are determined by competitive market forces. In addition to benefiting consumers and a jurisdiction’s economy as a whole, such a competitive environment rewards enterprises that respond efficiently to consumer demand. Enterprises can contribute to this process by providing information and advice when governments are considering laws and policies that might reduce efficiency or otherwise reduce the competitiveness of markets.
98. Enterprises should be aware that competition laws continue to be enacted, and that it is increasingly common for those laws to prohibit anti-competitive activities that occur abroad if they have a harmful impact on domestic consumers. Moreover, cross-border trade and investment makes it more likely that anti-competitive conduct taking place in one jurisdiction will have harmful effects in other jurisdictions.
Enterprises should therefore take into account both the law of the country in which they are operating and the laws of all countries in which the effects of their conduct are likely to be felt.
99. Finally, enterprises should recognise that competition authorities are engaging in more and deeper co-operation in investigating and challenging anti-competitive activity. See generally: Recommendation of the Council Concerning Co-operation between Member Countries on Anticompetitive Practices Affecting International Trade, C(95)130/FINAL; Recommendation of the Council on Merger Review, C(2005)34. When the competition authorities of various jurisdictions are reviewing the same conduct, enterprises’ facilitation of co-operation among the authorities promotes consistent and sound decision-making and competitive remedies while also permitting cost savings for governments and enterprises.
1. It is important that enterprises contribute to the public finances of host countries by making timely payment of their tax liabilities. In particular, enterprises should comply with both the letter and spirit of the tax laws and regulations of the countries in which they operate. Complying with the spirit of the law means discerning and following the intention of the legislature. It does not require an enterprise to make payment in excess of the amount legally required pursuant to such an interpretation. Tax compliance includes such measures as providing to the relevant authorities timely information that is relevant or required by law for purposes of the correct determination of taxes to be assessed in connection with their operations and conforming transfer pricing practices to the arm’s length principle.
2. Enterprises should treat tax governance and tax compliance as important elements of their oversight and broader risk management systems. In particular, corporate boards should adopt tax risk management strategies to ensure that the financial, regulatory and reputational risks associated with taxation are fully identified and evaluated.
Commentary on Taxation
100. Corporate citizenship in the area of taxation implies that enterprises should comply with both the letter and the spirit of the tax laws and regulations in all countries in which they operate, co-operate with authorities and make information that is relevant or required by law available to them. An enterprise complies with the spirit of the tax laws and regulations if it takes reasonable steps to determine the intention of the legislature and interprets those tax rules consistent with that intention in light of the statutory language and relevant, contemporaneous legislative history. Transactions should not be structured in a way that will have tax results that are inconsistent with the underlying economic consequences of the transaction unless there exists specific legislation designed to give that result. In this case, the enterprise should reasonably believe that the transaction is structured in
a way that gives a tax result for the enterprise which is not contrary to the intentions of the legislature.
101. Tax compliance also entails co-operation with tax authorities and provision of the information they require to ensure an effective and equitable application of the tax laws. Such co-operation should include responding in a timely and complete manner to requests for information made by a competent authority pursuant to the provisions of a tax treaty or exchange of information agreement. However, this commitment to provide information is not without limitation. In particular, the Guidelines make a link between the information that should be provided and its relevance to the enforcement of applicable tax laws. This recognises the need to balance the burden on business in complying with applicable tax laws and the need for tax authorities to have the complete, timely and accurate information to enable them to enforce their tax laws.
102. Enterprises’ commitments to co-operation, transparency and tax compliance should be reflected in risk management systems, structures and policies. In the case of enterprises having a corporate legal form, corporate boards are in a position to oversee tax risk in a number of ways. For example, corporate boards should proactively develop appropriate tax policy principles, as well as establish internal tax control systems so that the actions of management are consistent with the views of the board with regard to tax risk. The board should be informed about all potentially material tax risks and responsibility should be assigned for performing internal tax control functions and reporting to the board. A comprehensive risk management strategy that includes tax will allow the enterprise to not only act as a good corporate citizen but also to effectively manage tax risk, which can serve to avoid major financial, regulatory and reputation risk for an enterprise.
103. A member of a multinational enterprise group in one country may have extensive economic relationships with members of the same multinational enterprise group in other countries. Such relationships may affect the tax liability of each of the parties. Accordingly, tax authorities may need information from outside their jurisdiction in order to be able to evaluate those relationships and determine the tax liability of the member of the MNE group in their jurisdiction. Again, the information to be provided is limited to that which is relevant to or required by law for the proposed evaluation of those economic relationships for the purpose of determining the correct tax liability of the member of the MNE group. MNEs should co-operate in providing that information.
104. Transfer pricing is a particularly important issue for corporate citizenship and taxation. The dramatic increase in global trade and cross-border direct investment (and the important role played in such trade and investment by multinational enterprises) means that transfer pricing is a significant determinant of the tax liabilities of members of a multinational enterprise group because it materially influences the division of the tax base between countries in which the multinational enterprise operates. The arm’s length principle which is included in both the OECD Model Tax Convention and the UN Model Double Taxation Convention between Developed and Developing Countries, is the internationally accepted standard for adjusting the profits between associated enterprises. Application of the arm’s length principle avoids inappropriate shifting of profits or losses and minimises risks of double taxation. Its proper application requires multinational enterprises to co-operate with tax authorities and to furnish all information that is relevant or required by law regarding the selection of the transfer pricing method adopted for the international transactions undertaken by them and their related party. It is recognised that determining whether transfer pricing adequately reflects the arm’s length standard (or principle) is often difficult both for multinational enterprises and for tax administrations and that its application is not an exact science.
105. The Committee on Fiscal Affairs of the OECD undertakes ongoing work to develop recommendations for ensuring that transfer pricing reflects the arm’s length principle. Its work resulted in the publication in 1995 of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD Transfer Pricing Guidelines) which was the subject of the Recommendation of the OECD Council on the Determination of Transfer Pricing between Associated Enterprises (members of an MNE group would normally fall within the definition of Associated Enterprises). The OECD Transfer Pricing Guidelines and that Council Recommendation are updated on an ongoing basis to reflect changes in the global economy and experiences of tax administrations and taxpayers dealing with transfer pricing. The arm’s length principle as it applies to the attribution of profits of permanent establishments for the purposes of the determination of a host State’s taxing rights under a tax treaty was the subject of an OECD Council Recommendation adopted in 2008.
106. The OECD Transfer Pricing Guidelines focus on the application of the arm’s length principle to evaluate the transfer pricing of associated enterprises. The OECD Transfer Pricing Guidelines aim to help tax administrations (of both OECD member countries and non-member countries) and multinational enterprises by indicating mutually
satisfactory solutions to transfer pricing cases, thereby minimising conflict among tax administrations and between tax administrations and multinational enterprises and avoiding costly litigation. Multinational enterprises are encouraged to follow the guidance in the OECD Transfer Pricing Guidelines, as amended and supplemented7, in order to ensure that their transfer prices reflect the arm’s length principle.
7. One non-OECD adhering country, Brazil, does not apply the OECD Transfer Pricing Guidelines in its jurisdiction and accordingly the use of the guidance in those Guidelines by multinational enterprises for purposes of determining taxable income from their operations in this country does not apply in the light of the tax obligations set out in the legislation of this country. One other non-OECD adhering country, Argentina, points out that the OECD Transfer Pricing Guidelines are not compulsory in its jurisdiction.
II. IMPLEMENTATION PROCEDURES OF THE OECD GUIDELINES FOR MULTINATIONAL ENTERPRISES
Amendment of the Decision of the Council on the OECD Guidelines for Multinational Enterprises
THE COUNCIL,
Having regard to the Convention on the Organisation for Economic Co-operation and Development of 14th December 1960;
Having regard to the OECD Declaration on International Investment and Multinational Enterprises (the “Declaration”), in which the Governments of adhering countries (“adhering countries”) jointly recommend to multinational enterprises operating in or from their territories the observance of Guidelines for Multinational Enterprises (the “Guidelines”);
Recognising that, since operations of multinational enterprises extend throughout the world, international co-operation on issues relating to the Declaration should extend to all countries;
Having regard to the Terms of Reference of the Investment Committee, in particular with respect to its responsibilities for the Declaration [C(84)171(Final), renewed in C/M(95)21];
Considering the Report on the First Review of the 1976 Declaration [C(79)102(Final)], the Report on the Second Review of the Declaration [C/MIN(84)5(Final)], the Report on the 1991 Review of the Declaration [DAFFE/IME(91)23], and the Report on the 2000 Review of the Guidelines [C(2000)96];
Having regard to the Second Revised Decision of the Council of June 1984 [C(84)90], amended June 1991 [C/MIN(91)7/ANN1] and repealed on 27 June 2000 [C(2000)96/FINAL];
Considering it desirable to enhance procedures by which consultations may take place on matters covered by these Guidelines and to promote the effectiveness of the Guidelines;
On the proposal of the Investment Committee:
DECIDES:
II. IMPLEMENTATION PROCEDURES OF THE OECD GUIDELINES FOR MULTINATIONAL ENTERPRISES
1. Adhering countries shall set up National Contact Points to further the effectiveness of the Guidelines by undertaking promotional activities, handling enquiries and contributing to the resolution of issues that arise relating to the implementation of the Guidelines in specific instances, taking account of the attached procedural guidance. The business community, worker organisations, other non-governmental organisations and other interested parties shall be informed of the availability of such facilities.
2. National Contact Points in different countries shall co-operate if such need arises, on any matter related to the Guidelines relevant to their activities. As a general procedure, discussions at the national level should be initiated before contacts with other National Contact Points are undertaken.
3. National Contact Points shall meet regularly to share experiences and report to the Investment Committee.
4. Adhering countries shall make available human and financial resources to their National Contact Points so that they can effectively fulfil their responsibilities, taking into account internal budget priorities and practices.
II. The Investment Committee
1. The Investment Committee (“the Committee”) shall periodically or at the request of an adhering country hold exchanges of views on matters covered by the Guidelines and the experience gained in their application.
2. The Committee shall periodically invite the Business and Industry Advisory Committee to the OECD (BIAC), and the Trade Union Advisory Committee to the OECD (TUAC) (the “advisory bodies”), OECD Watch, as well as other international partners to express their views on matters covered by the Guidelines. In addition, exchanges of views with them on these matters may be held at their request.
3. The Committee shall engage with non-adhering countries on matters covered by the Guidelines in order to promote responsible business conduct worldwide in accordance with the Guidelines and to create a level playing field. It shall also strive to co-operate with non-adhering countries that have a special interest in the Guidelines and in promoting their principles and standards.
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4. The Committee shall be responsible for clarification of the Guidelines.Parties involved in a specific instance that gave rise to a request for clarification will be given the opportunity to express their views either orally or in writing. The Committee shall not reach conclusions on the conduct of individual enterprises.
5. The Committee shall hold exchanges of views on the activities of National Contact Points with a view to enhancing the effectiveness of the Guidelines and fostering functional equivalence of National Contact Points.
6. In fulfilling its responsibilities for the effective functioning of the Guidelines, the Committee shall take due account of the attached procedural guidance.
7. The Committee shall periodically report to the Council on matters covered by the Guidelines. In its reports, the Committee shall take account of reports by National Contact Points and the views expressed by the advisory bodies, OECD Watch, other international partners and non-adhering countries as appropriate.
8. The Committee shall, in co-operation with National Contact Points, pursue a proactive agenda that promotes the effective observance by enterprises of the principles and standards contained in the Guidelines. It shall, in particular, seek opportunities to collaborate with the advisory bodies, OECD Watch, other international partners and other stakeholders in order to encourage the positive contributions that multinational enterprises can make, in the context of the Guidelines, to economic, environmental and social progress with a view to achieving sustainable development, and to help them identify and respond to risks of adverse impacts associated with particular products, regions, sectors or industries.
III. Review of the Decision
This Decision shall be periodically reviewed. The Committee shall make proposals for this purpose.
II. IMPLEMENTATION PROCEDURES OF THE OECD GUIDELINES FOR MULTINATIONAL ENTERPRISES
The role of National Contact Points (NCPs) is to further the effectiveness of the Guidelines. NCPs will operate in accordance with core criteria of visibility, accessibility, transparency and accountability to further the objective of functional equivalence.
A. Institutional Arrangements
Consistent with the objective of functional equivalence and furthering the effectiveness of the Guidelines, adhering countries have flexibility in organising their NCPs, seeking the active support of social partners, including the business community, worker organisations, other non-governmental organisations, and other interested parties.
Accordingly, the National Contact Points:
1. Will be composed and organised such that they provide an effective basis for dealing with the broad range of issues covered by the Guidelines and enable the NCP to operate in an impartial manner while maintaining an adequate level of accountability to the adhering government.
2. Can use different forms of organisation to meet this objective. An NCP can consist of senior representatives from one or more Ministries, may be a senior government official or a government office headed by a senior official, be an interagency group, or one that contains independent experts. Representatives of the business community, worker organisations and other non-governmental organisations may also be included.
3. Will develop and maintain relations with representatives of the business community, worker organisations and other interested parties that are able to contribute to the effective functioning of the Guidelines.
II. IMPLEMENTATION PROCEDURES OF THE OECD GUIDELINES FOR MULTINATIONAL ENTERPRISES
1. Make the Guidelines known and available by appropriate means, including through on-line information, and in national languages. Prospective investors (inward and outward) should be informed about the Guidelines, as appropriate.
2. Raise awareness of the Guidelines and their implementation procedures, including through co-operation, as appropriate, with the business community, worker organisations, other non-governmental organisations, and the interested public.
3. Respond to enquiries about the Guidelines from:
a) other National Contact Points;
b) the business community, worker organisations, other non-governmental organisations and the public; and
c) governments of non-adhering countries.
C. Implementation in Specific Instances
The National Contact Point will contribute to the resolution of issues that arise relating to implementation of the Guidelines in specific instances in a manner that is impartial, predictable, equitable and compatible with the principles and standards of the Guidelines. The NCP will offer a forum for discussion and assist the business community, worker organisations, other non-governmental organisations, and other interested parties concerned to deal with the issues raised in an efficient and timely manner and in accordance with applicable law. In providing this assistance, the NCP will:
1. Make an initial assessment of whether the issues raised merit further examination and respond to the parties involved.
2. Where the issues raised merit further examination, offer good offices to help the parties involved to resolve the issues. For this purpose, the NCP will consult with these parties and where relevant:
a) seek advice from relevant authorities, and/or representatives of the business community, worker organisations, other non-governmental organisations, and relevant experts;
b) consult the NCP in the other country or countries concerned;
c) seek the guidance of the Committee if it has doubt about the interpretation of the Guidelines in particular circumstances;
II. IMPLEMENTATION PROCEDURES OF THE OECD GUIDELINES FOR MULTINATIONAL ENTERPRISES
d) offer, and with the agreement of the parties involved, facilitate access to consensual and non-adversarial means, such as conciliation or mediation, to assist the parties in dealing with the issues.
3. At the conclusion of the procedures and after consultation with the parties involved, make the results of the procedures publicly available, taking into account the need to protect sensitive business and other stakeholder information, by issuing:
a) a statement when the NCP decides that the issues raised do not merit further consideration. The statement should at a minimum describe the issues raised and the reasons for the NCP’s decision;
b) a report when the parties have reached agreement on the issues raised. The report should at a minimum describe the issues raised, the procedures the NCP initiated in assisting the parties and when agreement was reached. Information on the content of the agreement will only be included insofar as the parties involved agree thereto;
c) a statement when no agreement is reached or when a party is unwilling to participate in the procedures. This statement should at a minimum describe the issues raised, the reasons why the NCP decided that the issues raised merit further examination and the procedures the NCP initiated in assisting the parties. The NCP will make recommendations on the implementation of the Guidelines as appropriate, which should be included in the statement. Where appropriate, the statement could also include the reasons that agreement could not be reached.
The NCP will notify the results of its specific instance procedures to the Committee in a timely manner.
4. In order to facilitate resolution of the issues raised, take appropriate steps to protect sensitive business and other information and the interests of other stakeholders involved in the specific instance. While the procedures under paragraph 2 are underway, confidentiality of the proceedings will be maintained. At the conclusion of the procedures, if the parties involved have not agreed on a resolution of the issues raised, they are free to communicate about and discuss these issues. However, information and views provided during the proceedings by another party involved will remain confidential, unless that other party agrees to their disclosure or this would be contrary to the provisions of national law.
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5. If issues arise in non-adhering countries, take steps to develop an understanding of the issues involved, and follow these procedures where relevant and practicable.
D. Reporting
1. Each NCP will report annually to the Committee.
2. Reports should contain information on the nature and results of the activities of the NCP, including implementation activities in specific instances.
II. Investment Committee
1. The Committee will consider requests from NCPs for assistance in carrying out their activities, including in the event of doubt about the interpretation of the Guidelines in particular circumstances.
2. The Committee will, with a view to enhancing the effectiveness of the Guidelines and to fostering the functional equivalence of NCPs:
a) consider the reports of NCPs;
b) consider a substantiated submission by an adhering country, an advisory body or OECD Watch on whether an NCP is fulfilling its responsibilities with regard to its handling of specific instances;
c) consider issuing a clarification where an adhering country, an advisory body or OECD Watch makes a substantiated submission on whether an NCP has correctly interpreted the Guidelines in specific instances;
d) make recommendations, as necessary, to improve the functioning of NCPs and the effective implementation of the Guidelines;
e) co-operate with international partners;
f) engage with interested non-adhering countries on matters covered by the Guidelines and their implementation.
3. The Committee may seek and consider advice from experts on any matters covered by the Guidelines. For this purpose, the Committee will decide on suitable procedures.
4. The Committee will discharge its responsibilities in an efficient and timely manner.
II. IMPLEMENTATION PROCEDURES OF THE OECD GUIDELINES FOR MULTINATIONAL ENTERPRISES
5. In discharging its responsibilities, the Committee will be assisted by the OECD Secretariat, which, under the overall guidance of the Investment Committee, and subject to the Organisation’s Programme of Work and Budget, will:
a) serve as a central point of information for NCPs that have questions on the promotion and implementation of the Guidelines;
b) collect and make publicly available relevant information on recent trends and emerging practices with regard to the promotional activities of NCPs and the implementation of the Guidelines in specific instances. The Secretariat will develop unified reporting formats to support the establishment and maintenance of an up-to-date database on specific instances and conduct regular analysis of these specific instances;
c) facilitate peer learning activities, including voluntary peer evaluations, as well as capacity building and training, in particular for NCPs of new adhering countries, on the implementation procedures of the Guidelinessuch as promotion and the facilitation of conciliation and mediation;
d) facilitate co-operation between NCPs where appropriate; and
e) promote the Guidelines in relevant international forums and meetings and provide support to NCPs and the Committee in their efforts to raise awareness of the Guidelines among non-adhering countries.
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Commentary on the Implementation Procedures of the OECD Guidelines for Multinational Enterprises
1. The Council Decision represents the commitment of adhering countries to further the implementation of the recommendations contained in the text of the Guidelines. Procedural guidance for both NCPs and the Investment Committee is attached to the Council Decision.
2. The Council Decision sets out key adhering country responsibilities for the Guidelines with respect to NCPs, summarised as follows:
• Setting up NCPs (which will take account of the procedural guidance attached to the Decision), and informing interested parties of the availability of Guidelines-related facilities.
• Making available necessary human and financial resources. • Enabling NCPs in different countries to co-operate with each
other as necessary. • Enabling NCPs to meet regularly and report to the Committee.
3. The Council Decision also establishes the Committee’s responsibilities for the Guidelines, including:
• Organising exchanges of views on matters relating to the Guidelines.
• Issuing clarifications as necessary. • Holding exchanges of views on the activities of NCPs. • Reporting to the OECD Council on the Guidelines.
4. The Investment Committee is the OECD body responsible for overseeing the functioning of the Guidelines. This responsibility applies not only to the Guidelines, but to all elements of the Declaration (National Treatment Instrument, and the instruments on International Investment Incentives and Disincentives, and Conflicting Requirements). The Committee seeks to ensure that each element in the Declaration is respected and understood, and that they all complement and operate in harmony with each other.
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5. Reflecting the increasing relevance of responsible business conduct to countries outside the OECD, the Decision provides for engagement and co-operation with non-adhering countries on matters covered by the Guidelines. This provision allows the Committee to arrange special meetings with interested non-adhering countries to promote understanding of the standards and principles contained in the Guidelines and of their implementation procedures. Subject to relevant OECD procedures, the Committee may also associate them with special activities or projects on responsible business conduct, including by inviting them to its meetings and to the Corporate Responsibility Roundtables.
6. In its pursuit of a proactive agenda, the Committee will co-operate with NCPs and seek opportunities to collaborate with the advisory bodies, OECD Watch, and other international partners. Further guidance for NCPs in this respect is provided in paragraph 18.
I. Commentary on the Procedural Guidance for NCPs
7. National Contact Points have an important role in enhancing the profile and effectiveness of the Guidelines. While it is enterprises that are responsible for observing the Guidelines in their day-to-day behaviour, governments can contribute to improving the effectiveness of the implementation procedures. To this end, they have agreed that better guidance for the conduct and activities of NCPs is warranted, including through regular meetings and Committee oversight.
8. Many of the functions in the Procedural Guidance of the Decision are not new, but reflect experience and recommendations developed over the years. By making them explicit the expected functioning of the implementation mechanisms of the Guidelines is made more transparent. All functions are now outlined in four parts of the Procedural Guidance pertaining to NCPs: institutional arrangements, information and promotion, implementation in specific instances, and reporting.
9. These four parts are preceded by an introductory paragraph that sets out the basic purpose of NCPs, together with core criteria to promote the concept of “functional equivalence”. Since governments are accorded flexibility in the way they organise NCPs, NCPs should function in a visible, accessible, transparent, and accountable manner. These criteria will guide NCPs in carrying out their activities and will also assist the Committee in discussing the conduct of NCPs.
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Core Criteria for Functional Equivalence in the Activities of NCPs
Visibility. In conformity with the Decision, adhering governments agree to nominate NCPs, and also to inform the business community, worker organisations and other interested parties, including NGOs, about the availability of facilities associated with NCPs in the implementation of the Guidelines. Governments are expected to publish information about their NCPs and to take an active role in promoting the Guidelines, which could include hosting seminars and meetings on the instrument. These events could be arranged in co-operation with business, labour, NGOs, and other interested parties, though not necessarily with all groups on each occasion.
Accessibility. Easy access to NCPs is important to their effective functioning. This includes facilitating access by business, labour, NGOs, and other members of the public. Electronic communications can also assist in this regard. NCPs would respond to all legitimate requests for information, and also undertake to deal with specific issues raised by parties concerned in an efficient and timely manner.
Transparency. Transparency is an important criterion with respect to its contribution to the accountability of the NCP and in gaining the confidence of the general public. Thus, as a general principle, the activities of the NCP will be transparent. Nonetheless when the NCP offers its “good offices” in implementing the Guidelines in specific instances, it will be in the interests of their effectiveness to take appropriate steps to establish confidentiality of the proceedings. Outcomes will be transparent unless preserving confidentiality is in the best interests of effective implementation of the Guidelines.
Accountability. A more active role with respect to enhancing the profile of the Guidelines – and their potential to aid in the management of difficult issues between enterprises and the societies in which they operate – will also put the activities of NCPs in the public eye. Nationally, parliaments could have a role to play. Annual reports and regular meetings of NCPs will provide an opportunity to share experiences and encourage “best practices” with respect to NCPs. The Committee will also hold exchanges of views, where experiences would be exchanged and the effectiveness of the activities of NCPs could be assessed.
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10. NCP leadership should be such that it retains the confidence of social partners and other stakeholders, and fosters the public profile of the Guidelines.
11. Regardless of the structure Governments have chosen for their NCP, they can also establish multi-stakeholder advisory or oversight bodies to assist NCPs in their tasks.
12. NCPs, whatever their composition, are expected to develop and maintain relations with representatives of the business community, worker organisations, other non-governmental organisations, and other interested parties.
Information and Promotion
13. The NCP functions associated with information and promotion are fundamentally important to enhancing the profile of the Guidelines.
14. NCPs are required to make the Guidelines better known and available online and by other appropriate means, including in national languages. English and French language versions will be available from the OECD, and website links to the Guidelines website are encouraged. As appropriate, NCPs will also provide prospective investors, both inward and outward, with information about the Guidelines.
15. NCPs should provide information on the procedures that parties should follow when raising or responding to a specific instance. It should include advice on the information that is necessary to raise a specific instance, the requirements for parties participating in specific instances, including confidentiality, and the processes and indicative timeframes that will be followed by the NCP.
16. In their efforts to raise awareness of the Guidelines, NCPs will co-operate with a wide variety of organisations and individuals, including, as appropriate, the business community, worker organisations, other non-governmental organisations, and other interested parties. Such organisations have a strong stake in the promotion of the Guidelines and their institutional networks provide opportunities for promotion that, if used for this purpose, will greatly enhance the efforts of NCPs in this regard.
17. Another basic activity expected of NCPs is responding to legitimate enquiries. Three groups have been singled out for attention in this regard: i) other NCPs (reflecting a provision in the Decision); ii) the business community, worker organisations, other non-governmental organisations and the public; and iii) governments of non-adhering countries.
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18. In accordance with the Investment Committee’s proactive agenda, NCPs should maintain regular contact, including meetings, with social partners and other stakeholders in order to:
a) consider new developments and emerging practices concerning responsible business conduct;
b) support the positive contributions enterprises can make to economic, social and environmental progress;
c) participate where appropriate in collaborative initiatives to identify and respond to risks of adverse impacts associated with particular products, regions, sectors or industries.
Peer Learning
19. In addition to contributing to the Committee’s work to enhance the effectiveness of the Guidelines, NCPs will engage in joint peer learning activities. In particular, they are encouraged to engage in horizontal, thematic peer reviews and voluntary NCP peer evaluations. Such peer learning can be carried out through meetings at the OECD or through direct co-operation between NCPs.
Implementation in Specific Instances
20. When issues arise relating to implementation of the Guidelines in specific instances, the NCP is expected to help resolve them. This section of the Procedural Guidance provides guidance to NCPs on how to handle specific instances.
21. The effectiveness of the specific instances procedure depends on good faith behaviour of all parties involved in the procedures. Good faith behaviour in this context means responding in a timely fashion, maintaining confidentiality where appropriate, refraining from misrepresenting the process and from threatening or taking reprisals against parties involved in the procedure, and genuinely engaging in the procedures with a view to finding a solution to the issues raised in accordance with the Guidelines.
Guiding Principles for Specific Instances
22. Consistent with the core criteria for functional equivalence in their activities NCPs should deal with specific instances in a manner that is:
II. IMPLEMENTATION PROCEDURES OF THE OECD GUIDELINES FOR MULTINATIONAL ENTERPRISES
Impartial. NCPs should ensure impartiality in the resolution of specific instances.
Predictable. NCPs should ensure predictability by providing clear and publicly available information on their role in the resolution of specific instances, including the provision of good offices, the stages of the specific instance process including indicative timeframes, and the potential role they can play in monitoring the implementation of agreements reached between the parties.
Equitable. NCPs should ensure that the parties can engage in the process on fair and equitable terms, for example by providing reasonable access to sources of information relevant to the procedure.
Compatible with the Guidelines. NCPs should operate in accordance with the principles and standards contained in the Guidelines.
Coordination between NCPs in Specific Instances
23. Generally, issues will be dealt with by the NCP of the country in which the issues have arisen. Among adhering countries, such issues will first be discussed on the national level and, where appropriate, pursued at the bilateral level. The NCP of the host country should consult with the NCP of the home country in its efforts to assist the parties in resolving the issues. The NCP of the home country should strive to provide appropriate assistance in a timely manner when requested by the NCP of the host country.
24. When issues arise from an enterprise’s activity that takes place in several adhering countries or from the activity of a group of enterprises organised as consortium, joint venture or other similar form, based in different adhering countries, the NCPs involved should consult with a view to agreeing on which NCP will take the lead in assisting the parties. The NCPs can seek assistance from the Chair of the Investment Committee in arriving at such agreement. The lead NCP should consult with the other NCPs, which should provide appropriate assistance when requested by the lead NCP. If the parties fail to reach an agreement, the lead NCP should make a final decision in consultation with the other NCPs.
Initial Assessment
25. In making an initial assessment of whether the issue raised merits further examination, the NCP will need to determine whether the issue is
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bona fide and relevant to the implementation of the Guidelines. In this context, the NCP will take into account:
• the identity of the party concerned and its interest in the matter.
• whether the issue is material and substantiated.
• whether there seems to be a link between the enterprise’s activities and the issue raised in the specific instance.
• the relevance of applicable law and procedures, including court rulings.
• how similar issues have been, or are being, treated in other domestic or international proceedings.
• whether the consideration of the specific issue would contribute to the purposes and effectiveness of the Guidelines.
26. When assessing the significance for the specific instance procedure of other domestic or international proceedings addressing similar issues in parallel, NCPs should not decide that issues do not merit further consideration solely because parallel proceedings have been conducted, are under way or are available to the parties concerned. NCPs should evaluate whether an offer of good offices could make a positive contribution to the resolution of the issues raised and would not create serious prejudice for either of the parties involved in these other proceedings or cause a contempt of court situation. In making such an evaluation, NCPs could take into account practice among other NCPs and, where appropriate, consult with the institutions in which the parallel proceeding is being or could be conducted. Parties should also assist NCPs in their consideration of these matters by providing relevant information on the parallel proceedings.
27. Following its initial assessment, the NCP will respond to the parties concerned. If the NCP decides that the issue does not merit further consideration, it will inform the parties of the reasons for its decision.
Providing Assistance to the Parties
28. Where the issues raised merit further consideration, the NCP would discuss the issue further with parties involved and offer “good offices” in an effort to contribute informally to the resolution of issues. Where relevant, NCPs will follow the procedures set out in paragraph C-2a) through C-2d). This could include seeking the advice of relevant authorities, as well as representatives of the business community, labour organisations, other non-governmental organisations, and experts.
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Consultations with NCPs in other countries, or seeking guidance on issues related to the interpretation of the Guidelines may also help to resolve the issue.
29. As part of making available good offices, and where relevant to the issues at hand, NCPs will offer, or facilitate access to, consensual and non-adversarial procedures, such as conciliation or mediation, to assist in dealing with the issues at hand. In common with accepted practices on conciliation and mediation procedures, these procedures would be used only upon agreement of the parties concerned and their commitment to participate in good faith during the procedure.
30. When offering their good offices, NCPs may take steps to protect the identity of the parties involved where there are strong reasons to believe that the disclosure of this information would be detrimental to one or more of the parties. This could include circumstances where there may be a need to withhold the identity of a party or parties from the enterprise involved.
Conclusion of the Procedures
31. NCPs are expected to always make the results of a specific instance publicly available in accordance with paragraphs C-3 and C-4 of the Procedural Guidance.
32. When the NCP, after having carried out its initial assessment, decides that the issues raised in the specific instance do not merit further consideration, it will make a statement publicly available after consultations with the parties involved and taking into account the need to preserve the confidentiality of sensitive business and other information. If the NCP believes that, based on the results of its initial assessment, it would be unfair to publicly identify a party in a statement on its decision, it may draft the statement so as to protect the identity of the party.
33. The NCP may also make publicly available its decision that the issues raised merit further examination and its offer of good offices to the parties involved.
34. If the parties involved reach agreement on the issues raised, the parties should address in their agreement how and to what extent the content of the agreement is to be made publicly available. The NCP, in consultation with the parties, will make publicly available a report with the results of the proceedings. The parties may also agree to seek the assistance of the NCP in following-up on the implementation of the
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agreement and the NCP may do so on terms agreed between the parties and the NCP.
35. If the parties involved fail to reach agreement on the issues raised or if the NCP finds that one or more of the parties to the specific instance is unwilling to engage or to participate in good faith, the NCP will issue a statement, and make recommendations as appropriate, on the implementation of the Guidelines. This procedure makes it clear that an NCP will issue a statement, even when it feels that a specific recommendation is not called for. The statement should identify the parties concerned, the issues involved, the date on which the issues were raised with the NCP, any recommendations by the NCP, and any observations the NCP deems appropriate to include on the reasons why the proceedings did not produce an agreement.
36. The NCP should provide an opportunity for the parties to comment on a draft statement. However, the statement is that of the NCP and it is within the NCP’s discretion to decide whether to change the draft statement in response to comments from the parties. If the NCP makes recommendations to the parties, it may be appropriate under specific circumstances for the NCP to follow-up with the parties on their response to these recommendations. If the NCP deems it appropriate to follow-up on its recommendations, the timeframe for doing so should be addressed in the statement of the NCP.
37. Statements and reports on the results of the proceedings made publicly available by the NCPs could be relevant to the administration of government programmes and policies. In order to foster policy coherence, NCPs are encouraged to inform these government agencies of their statements and reports when they are known by the NCP to be relevant to a specific agency’s policies and programmes. This provision does not change the voluntary nature of the Guidelines.
Transparency and Confidentiality
38. Transparency is recognised as a general principle for the conduct of NCPs in their dealings with the public (see paragraph 9 in “Core Criteria” section, above). However, paragraph C-4 of the Procedural Guidance recognises that there are specific circumstances where confidentiality is important. The NCP will take appropriate steps to protect sensitive business information. Equally, other information, such as the identity of individuals involved in the procedures, should be kept confidential in the interests of the effective implementation of the Guidelines. It is understood that proceedings include the facts and arguments brought forward by the parties. Nonetheless, it remains
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important to strike a balance between transparency and confidentiality in order to build confidence in the Guidelines procedures and to promote their effective implementation. Thus, while paragraph C-4 broadly outlines that the proceedings associated with implementation will normally be confidential, the results will normally be transparent.
Issues Arising in Non-Adhering Countries
39. As noted in paragraph 2 of the Concepts and Principles chapter, enterprises are encouraged to observe the Guidelines wherever they operate, taking into account the particular circumstances of each host country.
• In the event that Guidelines-related issues arise in a non-adhering country, home NCPs will take steps to develop an understanding of the issues involved. While it may not always be practicable to obtain access to all pertinent information, or to bring all the parties involved together, the NCP may still be in a position to pursue enquiries and engage in other fact finding activities. Examples of such steps could include contacting the management of the enterprise in the home country, and, as appropriate, embassies and government officials in the non-adhering country.
• Conflicts with host country laws, regulations, rules and policies may make effective implementation of the Guidelines in specific instances more difficult than in adhering countries. As noted in the commentary to the General Policies chapter, while the Guidelinesextend beyond the law in many cases, they should not and are not intended to place an enterprise in a situation where it faces conflicting requirements.
• The parties involved will have to be advised of the limitations inherent in implementing the Guidelines in non-adhering countries.
• Issues relating to the Guidelines in non-adhering countries could also be discussed at NCP meetings with a view to building expertise in handling issues arising in non-adhering countries.
Indicative Timeframe
40. The specific instance procedure comprises three different stages:
1. Initial assessment and decision whether to offer good offices to assist the parties: NCPs should seek to conclude an initial assessment
II. IMPLEMENTATION PROCEDURES OF THE OECD GUIDELINES FOR MULTINATIONAL ENTERPRISES
within three months, although additional time might be needed in order to collect information necessary for an informed decision.
2. Assistance to the parties in their efforts to resolve the issues raised:If an NCP decides to offer its good offices, it should strive to facilitate the resolution of the issues in a timely manner. Recognising that progress through good offices, including mediation and conciliation, ultimately depends upon the parties involved, the NCP should, after consultation with the parties, establish a reasonable timeframe for the discussion between the parties to resolve the issues raised. If they fail to reach an agreement within this timeframe, the NCP should consult with the parties on the value of continuing its assistance to the parties; if the NCP comes to the conclusion that the continuation of the procedure is not likely to be productive, it should conclude the process and proceed to prepare a statement.
3. Conclusion of the procedures: The NCP should issue its statement or report within three months after the conclusion of the procedure.
41. As a general principle, NCPs should strive to conclude the procedure within 12 months from receipt of the specific instance. It is recognised that this timeframe may need to be extended if circumstances warrant it, such as when the issues arise in a non-adhering country.
Reporting to the Investment Committee
42. Reporting would be an important responsibility of NCPs that would also help to build up a knowledge base and core competencies in furthering the effectiveness of the Guidelines. In this light, NCPs will report to the Investment Committee in order to include in the Annual Report on the OECD Guidelines information on all specific instances that have been initiated by parties, including those that are in the process of an initial assessment, those for which offers of good offices have been extended and discussions are in progress, and those in which the NCP has decided not to extend an offer of good offices after an initial assessment. In reporting on implementation activities in specific instances, NCPs will comply with transparency and confidentiality considerations as set out in paragraph C-4.
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II. Commentary on the Procedural Guidance for the Investment Committee
43. The Procedural Guidance to the Council Decision provides additional guidance to the Committee in carrying out its responsibilities, including:
• Discharging its responsibilities in an efficient and timely manner.
• Considering requests from NCPs for assistance.
• Holding exchanges of views on the activities of NCPs.
• Providing for the possibility of seeking advice from international partners and experts.
44. The non-binding nature of the Guidelines precludes the Committee from acting as a judicial or quasi-judicial body. Nor should the findings and statements made by the NCP (other than interpretations of the Guidelines) be questioned by a referral to the Committee. The provision that the Committee shall not reach conclusions on the conduct of individual enterprises has been maintained in the Decision itself.
45. The Committee will consider requests from NCPs for assistance, including in the event of doubt about the interpretation of the Guidelinesin particular circumstances. This paragraph reflects paragraph C-2c) of the Procedural Guidance to the Council Decision pertaining to NCPs, where NCPs are invited to seek the guidance of the Committee if they have doubt about the interpretation of the Guidelines in these circumstances.
46. When discussing NCP activities, the Committee may make recommendations, as necessary, to improve their functioning, including with respect to the effective implementation of the Guidelines.
47. A substantiated submission by an adhering country, an advisory body or OECD Watch that an NCP was not fulfilling its procedural responsibilities in the implementation of the Guidelines in specific instances will also be considered by the Committee. This complements provisions in the section of the Procedural Guidance pertaining to NCPs reporting on their activities.
48. Clarifications of the meaning of the Guidelines at the multilateral level would remain a key responsibility of the Committee to ensure that the meaning of the Guidelines would not vary from country to country. A substantiated submission by an adhering country, an advisory body or OECD Watch with respect to whether an NCP interpretation of the
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Guidelines is consistent with Committee interpretations will also be considered.
49. In order to engage with non-adhering countries on matters covered by the Guidelines, the Committee may invite interested non-adhering countries to its meetings, annual Roundtables on Corporate Responsibility, and meetings relating to specific projects on responsible business conduct.
50. Finally, the Committee may wish to call on experts to address and report on broader issues (for example, child labour or human rights) or individual issues, or to improve the effectiveness of procedures. For this purpose, the Committee could call on OECD in-house expertise, international organisations, the advisory bodies, non-governmental organisations, academics and others. It is understood that this will not become a panel to settle individual issues.
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Enriching the Connotations of Shagang Culture Enthusiastic Social Public Welfare Undertakings
Shagang always keeps in mind of the philosophy on he public service that is “repay he country wi h the prosperity on steel business, create more wealth, make employees become the backbones of country development and feedback to the society” for years. We have and will always actively participate in social public welfare charity as the obligatory lofty mission, enrich he connotations of Shagang Culture furthermore and to be the new spiritual and cultural power as well. Shagang has donated over 600 million on education, infrastructure construction, figh ing flood, anti-poverty, culture development, sports undertakings and the medical treatment and public health from the provincial and municipal level. All these performances have showed the outstanding private steel enterprise unique elegant demeanor.The first, undertake the heavy responsibilities to maintain social stability and unity.Shagang plays the role which more and more important to the state and society, and become a large taxpayer in Jiangsu Province year after year. Along with stable development of the steel business, Shagang also help the local government to exclude the difficulties and anxieties actively, resettled the landless farmers and arranged skill training for them. Over 5,000 farmers has been hired by Shagang Group Company, hey transformed the roles from farmers to workers and become he stable ci izens, their yearly incomes have improved from only thousand Yuan to over 50 thousand Yuan, it helps to settle down their worries after losing the lands. Moreover, Shagang supports the development of Subei Districts of Jiangsu Province (The economic less developed region on the north side of Yangtze River) and Anhui Province hose less-developed areas, employed over 1,800 labors into Shagang with equal pay for equal work policy, all these activities have helped to maintain the social stability and unity very well.Shagang Group Company donated 5.50 million on the construction of Yangjin highway for the convenient local transportation; donated 10 million to reconstruct he drainage systems of XiangYang used Resident Lots in Jinfeng Town Zhangjiagang City, resolved he big troubles impacted the citizens live inside; In 2009, Shagang donated 20 million to Jinfeng Hospital and 30 million for building the Jinfeng People’s Hospital in 2010. Shagang Huaigang Special Steel Company has supported the development of Matou Town in HuaiYin District of Huai’an City, supplied them large-scaled equipments, donated 800 housand for establish the township enterprise and reconstruct the water system, helped them overcome the poverty, keeps ahead of he other towns. In 2006, Huaigang invested 900 thousand to Mudian Town in Xuyu County for establishing the unburned pressed brick factory, in order to solve he employment problem of the local villagers. In 2011, donated 100 thousand to Huai’An Afforestation Committee to build the Liulaozhuang Memorial Forests and 200 thousand to Huai’an National Fitness Center for cultural and sports development.Secondly, combat the earthquake and carry out relief work, to spread love and care.When he state and society needs, Shagang always do not hesitate to lend a helping hand, return society the fruits of enterprise development, and pass the loving care from he staff to all people.In 12th May, 2012, Wenchuan earthquake with a magnitude 8 disaster, Shagang Group Company organized he staff to donate over 95.50 million for the relief work, and donated 1 million Dollars to the Taiwan compatriots for rebuild he home after the Morax Typhoon Disaster.In 2003, the extremely serious flood since 1954 attacked the area around Huai’an Huaihe River, Shagang Huaigang Special Steel Company donated medicines and sleeping bags which wor h 251 thousand to Municipal Civil Affairs Bureau; in 2009, donated 758 thousand for Qinghai Yushu earthquake relief work. The hird, dona ing and developing education undertakings.In July of 2011, Shagang Group donated 10 million to Suzhou University Scholarship, 2 million to Nanjing University Education Development Founda ion; In September, in
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order to upgrade the teaching facilities for he primary and middle schools in Jinfeng Town, Shagang donated 390 thousand to purchase the computers; and donated totally 130 thousand to Nanjing University of Technology, Chongqing Science and Technology University and Zhangjiagang Shazhou Middle School. In May 2012, donated 500 thousand as the Nanjing University Education Development Fund for adding he needy-students and another 1 million to Nanjing University Education Development Founda ion in July; in September, donated 5 million as Suzhou University Education Development Fund and 1.35 million to Suzhou University Educa ion Development Founda ion in 2013.
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Administrative Measures on Accreditation of High-tech Enterprises
Promulgation Authorities: The Ministry of Science and Technology, Ministry of Finance, State Administration of Taxation
Promulgation Date: 2008.04.14
Effective Date: 2008.01.01
Validity Status: nullified / repealed
Administrative Measures on Accreditation of High-tech Enterprises
Ministry of Science and Technology
Ministry of Finance
State Administration of Taxation
14 April 2008
CHAPTER 1 — GENERAL PRINCIPLES
Article 1These Measures are specifically formulated pursuant to the relevant provisions of the Enterprise Income Tax Law of the People's Republic of China (hereinafter referred to as the "Enterprise Income Tax Law"), the Implementation Regulations for the Enterprise Income Tax Law of the People's Republic of China (hereinafter referred to as the "Implementation Regulations") for the purposes of supporting and encouraging development of high-tech enterprises.
Article 2High-tech enterprises mentioned in these Measures shall refer to resident enterprises within the territory of China (excluding Hong Kong, Macau and Taiwan) which have been registered for more than one year and which are continuously engaging in research and development and technology commercialisation within the realm of the Regions of Advanced Technologies Strongly Supported by the State (see Appendix — omitted) which form the core independent intellectual property of the enterprise, and carrying out business activities on such basis.
Article 3The administration of accreditation of high-tech enterprises shall comply with the principles of emphasising the enterprise entity, encouraging technological advancement, implementing dynamic management and adhering to fairness and equitableness.
Article 4High-tech enterprises, which are accredited pursuant to these Measures, may apply for entitlement to the tax incentive policies pursuant to the relevant provisions of the Enterprise Income Tax Law, the Implementation Regulations, the Administrative Law of the People's Republic of China on the Levying and Collection of Taxes (hereinafter referred to as the "Tax Collection Law"), the Regulations on Implementation of Law of the People's Republic of China on Administration of Tax Collection (hereinafter referred to as the "Implementation Regulations for Tax Collection Law"), etc.
Article 5The Ministry of Science and Technology, Ministry of Finance and State Administration of Taxation shall be responsible for guiding, administering and supervising the accreditation of high-tech enterprises nationwide.
CHAPTER 2 — ORGANISATION AND IMPLEMENTATION
Article 6The Ministry of Science and Technology, Ministry of Finance and State Administration of Taxation shall form the Leading Team for Administration of Accreditation of High-tech Enterprises Nationwide (hereinafter referred to as the "Leading Team"), which shall mainly be responsible for:
(1) determining the direction for administration of accreditation of high-tech enterprises nationwide and reviewing the work reports on administration of accreditation of high-tech enterprises;
(2) coordinating and resolving major issues in accreditation and implementation of related policies;
(3) ruling on major disputes in accreditation of high-tech enterprises and, supervising and inspecting the accreditation works in various localities; and
(4) giving opinions on rectification for localities which encounter major issues in accreditation of high-tech enterprises.
Article 7The Leading Team shall establish an office at the Ministry of Science and Technology. The main duties of the office shall include:
(1) submitting work reports on administration of accreditation of high-tech enterprises;
(2) organising and implementing the inspection of administration of accreditation of high-tech enterprises;
(3) taking charge of administration of filing of the qualifications of experts involved in accreditation of high-tech enterprises;
(4) setting up and managing the "Network for Administration of Accreditation of High-tech Enterprises"; and
(5) taking on other tasks assigned by the Leading Team.
Article 8The administrative authorities for accreditation of high-tech enterprises within a locality formed by the science and technology administration and management authorities and counterpart financial and tax authorities of all provinces, autonomous regions, centrally-administered municipalities and municipalities with independent planning (hereinafter referred to as the "accreditation authorities") shall carry out the following works pursuant to these Measures:
(1) take charge of accreditation of high-tech enterprises within the respective administrative region;
(2) accept applications for review of qualifications of high-tech enterprises submitted by enterprises;
(3) supervise and inspect accredited enterprises, and accept, verify and handle the relevant reports; and
(4) select experts participating in accreditation of high-tech enterprises and file records with the office of the Leading Team.
Article 9Upon obtaining the qualification as a high-tech enterprise, the enterprise shall complete tax reduction and exemption formalities with the tax authorities in charge pursuant to the provisions of Article 4 of these Measures.
Where there is a change in the criteria for tax reduction or exemption of a high-tech enterprise entitling to tax reduction or exemption incentives, it shall submit a report to the tax authorities in charge within 15 days from the date of change; where a high-tech enterprise no longer satisfies the criteria for tax reduction or exemption, it shall perform tax payment obligations pursuant to the law; where such a high-tech enterprise fails to pay tax pursuant to the law, the tax authorities in charge shall recover tax payment from the enterprise. Concurrently, where the tax authorities in charge has discovered in the course of the implementation of tax incentive policies that an enterprise does not qualify as a high-tech enterprise, the tax authorities in charge shall request the accreditation authorities to review the status of the enterprise. During the review period, the entitlement to tax reduction or exemption incentives of the enterprise may be suspended.
CHAPTER 3 — CRITERIA AND PROCEDURES
Article 10An enterprise shall satisfy all the following criteria to be accredited as a high-tech enterprise:
(1) it is an enterprise registered within the territory of China (excluding Hong Kong, Macau and Taiwan) which has obtained independent intellectual property for the core technology of its key products (services) through independent research and development, assignment, acceptance of gift, merger and acquisition, etc. during the past three years or through exclusive licensing for more than five years;
(2) the products (services) fall under the scope stipulated in the Regions of Advanced Technologies Strongly Supported by the State;
(3) the technical personnel holding specialised degrees and higher qualifications constitute more than 30% of the total number of employees of the enterprise in the current year; and among the technical personnel, the research and development personnel constitute more than 10% of the total number of employees of the enterprise in the current year;
(4) the enterprise has, in its feat to obtain new knowledge in science and technology (excluding humanities and social sciences), applied new knowledge in science and technology innovatively or improved technology and products (services) substantially by engaging in continuous research and development activities; and the percentage of the total amount of expenditure for research and development in the past three accounting years in the total amount of revenue from sale shall satisfy the following requirements:
(i) the percentage shall not be less than 6% for enterprises whose revenue from sale in the past year is less than RMB50 million;
(ii) the percentage shall not be less than 4% for enterprises whose revenue from sale in the past year ranges from RMB50 million to RMB200 million; and
(iii) the percentage shall not be less than 3% for enterprises whose revenue from sale in the past year is more than RMB200 million;
where the total amount of expenditure for research and development incurred by an enterprise within the territory of China constitutes not less than 60% of its total amount of expenditure for research and development; and for the enterprise which has been registered for less than three years, the computation shall be based on the actual number of year of operation of the enterprise;
(5) the revenue from high-tech products (services) constitutes more than 60% of the total revenue of the enterprise in the current year; and
(6) the enterprise satisfies the requirements of the Guidelines for Administration of Accreditation of High-tech Enterprises (to be formulated separately) in terms of the management level of its research and development organisation, its ability in technology commercialisation, the quantity of independent intellectual property and the growth in sales and gross assets, etc.
Article 11The accreditation procedures of high-tech enterprises shall be as follows:
(1) self-assessment and application of the enterprise
The enterprise shall login to the "Network for Administration of Accreditation of High-tech Enterprises" and refer to the criteria stipulated in Article 10 of these Measures for self-assessment. Where the enterprise holds the view that it satisfies the accreditation criteria, it may submit an application for accreditation to the accreditation authorities.
(2) submit the following application materials
(i) application for accreditation of high-tech enterprises;
(ii) duplicate copy of enterprise business licence and tax registration certificate (photocopy);
(iii) intellectual property certificate (exclusive licensing contract), approval document for manufacturing, proof material for new products or new technologies (verified new), product quality inspection report, proof of project proposal for technological plan at provincial level and other relevant proof materials;
(iv) statement of the number of employees of the enterprise, qualification structure and percentage of research and development personnel against the total number of employees of the enterprise;
(v) statement of research and development expenditure of the enterprise for the past three accounting years verified by a qualified intermediary (where the enterprise is in operation for less than three years, based on the actual number of year in operation), and attached explanatory materials for research and development activities; and
(vi) financial statements of the enterprise for the past three accounting years verified by a qualified intermediary (including balance sheet, income statement and cash flow statement; where the enterprise is in operation for less than three years, based on the actual number of year in operation) and statement of revenue from technical activities.
(3) compliance checks
The accreditation authorities shall establish a panel of experts for judging the accreditation of high-tech enterprises; experts from the panel shall be randomly selected according to the application materials submitted by an enterprise to review the applicant's qualifications and give accreditiation opinions.
(4) Accreditation, public announcement and filing
The accreditation authorities shall conduct accreditation of enterprises. A public announcement of accredited high-tech enterprises shall be placed on the "Network for
Administration of Accreditation of High-tech Enterprises" for 15 working days; where no objection is raised, the list shall be filed with the office of the Leading Team for records, a public announcement of the outcome of accreditation shall be published on the "Network for Administration of Accreditation of High-tech Enterprises", and a standardised print of the "Certificate of High-tech Enterprise" shall be issued to the enterprises.
Article 12The qualifications of a high-tech enterprise shall be valid for three years from the date of issuance of the certificate. An enterprise shall submit an application for review of qualifications within three months before the expiry date of the certificate. Where an enterprise fails to submit an application for review of qualifications or fails to pass the review of qualifications, it will cease to qualify as a high-tech enterprise automatically with effect from the expiry date of the certificate.
Article 13An application for review of qualifications of a high-tech enterprise shall be supported with a report on research and development, other technological innovations, etc. carried out in the past three years.
In the review of qualifications, emphasis shall be placed on whether the enterprise satisfies the criteria stipulated in Article 10 (4); where the enterprise satisfies the criteria, public announcement and filing shall be made pursuant to Article 11 (4).
The qualifications of a high-tech enterprise which has passed the review of qualifications shall be valid for three years. Where the enterprise makes another application for accreditation upon the expiry of the validity period, the application shall be processed pursuant to the provisions of Article 11 of these Measures.
Article 14Where there is a significant change in the business activities, manufacturing and technological activities, etc. of a high-tech enterprise (such as merger and acquisition, restructuring, change of business, etc.), the enterprise shall report to the administrative authorities for accreditation within 15 days; where the enterprise no longer satisfies the criteria stipulated in these Measures after the change, it shall cease to qualify as a high-tech enterprise from that year; where the enterprise needs to apply for accreditation as a high-tech enterprise, it shall complete the formalities stipulated in Article 11 of these Measures.
In the event of a change of name of a high-tech enterprise, the name change shall be confirmed with the accreditation authorities; upon making a public announcement and filing, a new "Certificate of Accreditation" shall be issued, however, there shall be no change in the serial number and validity period.
CHAPTER 4 — PENALTY PROVISIONS
Article 15Under any of the following circumstances, the qualifications of an accredited high-tech enterprise shall be cancelled:
(1) the enterprise has provided false information in the process of application for accreditation;
(2) the enterprise is found to have committed tax evasion, tax fraud, etc.;
(3) the enterprise has encountered a significant safety or quality incident; and
(4) the enterprise has committed illegal acts or violations of environmental or other laws and regulations, and has been punished by the relevant authorities.
Where an enterprise has had its qualification as a high-tech enterprise cancelled, the accreditation authorities shall not accept any application for accreditation from such enterprise within five years.
Article 16All organisations and personnel participating in accreditation of high-tech enterprises shall bear integrity and compliance obligations to their accreditation works, and confidentiality obligations to the relevant materials and information of the enterprises applying for accreditation. Organisations and personnel in violation of the relevant requirements and disciplines for accreditation of high-tech enterprises shall be dealt with accordingly.
CHAPTER 5 — SUPPLEMENTARY PROVISIONS
Article 17The former Accreditation Criteria and Measures for High-tech Enterprises Outside State High-Tech Industrial Development Zones (Guokefahuozi (1996) 018) and the former Accreditation Criteria and Measures for High-tech Enterprises in State High-Tech Industrial Development Zones (Guokefahuozi (2000) 324) shall not be executed with effect from the date of implementation of these Measures.
Article 18The Ministry of Science and Technology, Ministry of Finance and State Administration of Taxation shall be responsible for the interpretation of these Measures.
Article 19The Ministry of Science and Technology, Ministry of Finance and State Administration of Taxation shall formulate the Guidelines for Administration of Accreditation of High-tech Enterprises separately.
Article 20These Measures shall be effective 1 January 2008.
Appendix: Regions of Advanced Technologies Strongly Supported by the State (omitted)
Corporate Income Tax Law of the People's Republic of China Promulgation Authorities: The National People's Congress of the People's Republic of China
Promulgation Date: 2007.03.16
Effective Date: 2008.01.01
Validity Status: valid
Document Number: Presidential Decree No. 63 of the People’s Republic of China
Corporate Income Tax Law of the People's Republic of China
Presidential Decree No. 63 of the People's Republic of China
Adopted by the Fifth Session of the Tenth National People's Congress on 16 March 2007
Chapter 1 — General Principles
Article 1Enterprises and other organisations that derive income from or have income accruing in the People's Republic of China (hereinafter collectively referred to as "enterprises") are corporate income tax payers, who shall pay corporate income tax payable pursuant to the provisions of this Law.
This Law shall not apply to enterprises wholly-owned by an individual and partnership enterprises.
Article 2Enterprises shall be divided into resident enterprises and non-resident enterprises.
A resident enterprise referred to in this Law shall mean, an enterprise lawfully incorporated in China, or an enterprise lawfully incorporated pursuant to the laws of a foreign country (region) but where actual management functions are conducted in China.
A non-resident enterprise referred to in this Law shall mean, an enterprise lawfully incorporated pursuant to the laws of a foreign country (region) that has an office or premises established in China with no actual management functions performed in China, or an enterprise that has income derived from or accruing in China although it does not have an office or premises in China.
Article 3Corporate income tax shall be payable by a resident enterprise for income derived from or accruing in or outside China.
Corporate income tax shall be payable by a non-resident enterprise, for income derived from or accruing in China by its office or premises established in China, and for income derived from or accruing outside China for which the established office or premises has a de facto relationship.
Where the non-resident enterprise has no office or premises established in China or the income derived or accrued has no de facto relationship with the office or premises established, corporate income tax shall be payable by the non-resident enterprise for income derived from or accruing in China.
Article 4The corporate income tax shall be at the rate of 25%.
The applicable tax rate for income of a non-resident enterprise under the provisions of the third paragraph of Article 3 shall be 20%.
Chapter 2 — Taxable Amount of Income
Article 5The taxable amount of income of an enterprise shall be the total income of the enterprise in each tax year less non-taxable income, tax-exempt income, various deductions and permitted amount of losses in previous years made good.
Article 6The total income of an enterprise comprises monetary and non-monetary forms of income received by the enterprise from various sources, which include:
(1) income from sale of goods;
(2) income from provision of labour services;
(3) income from transfer of property;
(4) gains from dividends, bonus issues or other returns on equity investment;
(5) interest income;
(6) rental income;
(7) income from royalties;
(8) income from gifts and donations; and
(9) other income.
Article 7The following income within the total income is deemed as non-taxable income:
(1) financial allocation;
(2) administrative and institutional expenses and government funds lawfully collected and brought under financial administration;
(3) other non-taxable income stipulated by the State Council.
Article 8Costs, expenses, taxes, losses and other reasonable expenditure incurred in relation to income received by an enterprise may be deducted when computing the taxable amount of income.
Article 9Expenditure in the form of charitable donations and gifts within 12% of the gross annual profit by an enterprise may be deducted when computing the taxable amount of income.
Article 10The following expenditures may not be deducted when computing the taxable amount of income:
(1) dividends, bonus issues or other returns on equity investment issued to investors;
(2) enterprise income tax;
(3) late tax payment fine;
(4) penalties, fines and losses on confiscated property;
(5) expenditures in the form of donations and gifts other than those stipulated in Article 9;
(6) sponsorship expenditure;
(7) expenditures out of the capital reserves that have yet been audited and determined;
(8) other expenses unrelated to income.
Article 11Fixed asset depreciation computed by an enterprise pursuant to provisions may be deducted when computing the taxable amount of income.
Depreciation is not deductible for the following fixed assets:
(1) fixed assets other than houses and buildings that have not been put into use;
(2) fixed assets rented under an operating lease;
(3) fixed assets rented out under a financing lease;
(4) fixed assets still in use despite having been fully depreciated;
(5) fixed assets unrelated to business activities;
(6) independently valued land that is regarded as a fixed asset account entry; and
(7) other fixed assets for which deduction of depreciation is not allowed.
Article 12Amortisation of intangible asset expenses computed by an enterprise pursuant to provisions may be deducted when computing the taxable amount of income.
Amortisation of expenses is not deductible for the following intangible assets:
(1) expenditure for intangible assets developed by the enterprise that have already been deducted during computation of the taxable amount of income;
(2) individually created goodwill;
(3) intangible assets unrelated to business activities;
(4) other intangible assets for which deduction of amortisation expenses is not allowed.
Article 13The following expenditures incurred by an enterprise as long-term prepaid expenses that are amortised pursuant to provisions may be deducted when computing the taxable amount of income:
(1) expenditure for the reconstruction of fixed assets which have been fully depreciated;
(2) expenditure for the reconstruction of fixed assets under lease;
(3) expenditure for the overhaul of fixed assets; and
(4) other expenditure which ought to be regarded as long-term prepaid expenses.
Article 14Asset investment costs for asset investments made by an enterprise during the period of external investment may not be deducted when computing the taxable amount of income.
Article 15Inventory costs computed by an enterprise pursuant to provisions for inventory used or sold by the enterprise may be deducted when computing the taxable amount of income.
Article 16The net value of an asset transferred by an enterprise may be deducted when computing the taxable amount of income.
Article 17When an enterprise consolidates computation of the corporate income tax payable, it shall not set-off an overseas business entity's losses against the profits of a business entity in China.
Article 18Where an enterprise incurs a loss in a tax year, the enterprise is allowed to carry the loss forward to subsequent years to be set-off against income from subsequent years, provided the loss carried forward does not exceed five years.
Article 19The taxable amount of income for income derived by or accruing to a non-resident enterprise pursuant to the provisions of the third paragraph of Article 3 shall be computed as follows:
(1) the taxable amount of income for gains from dividends, bonus issues or other returns on equity investment, and income from interest, rental and royalty shall be the total amount of gains or income;
(2) the taxable amount of income for a transfer of property shall be the total amount of income from the transfer less the net value of the property; and
(3) the taxable amount of income for all other income shall be computed with reference to the above methods stipulated in items (1) and (2).
Article 20The specific scopes, standards and asset tax treatment measures for incomes and deductions stipulated in this Chapter shall be formulated by the finance and taxation departments of the State Council.
Article 21Where an enterprise's financial and accounting methods during computation of the enterprise's taxable amount of income are inconsistent with the provisions in tax laws and administrative regulations, the provisions in laws and administrative regulations shall prevail.
Chapter 3 — Tax Amount Payable
Article 22The amount of tax payable by an enterprise shall be its taxable amount of income multiplied by the applicable tax rate less any tax reduction and exemption incentives stipulated in this Law.
Article 23Where an enterprise has paid income tax overseas for any of the following income derived, the income tax paid overseas may be used to set-off the amount of tax payable for the current period; the total allowable amount of tax set-off shall be limited to the total amount of tax payable over such income pursuant to the provisions of this Law; amounts in excess of the tax set-off limit for the current period may be used to set-off the amount of tax payable for subsequent periods within their tax set-off limits within the next five years:
(1) taxable income derived by a resident enterprise outside China;
(2) taxable income derived from or accruing outside China by a non-resident enterprise with office or premises established in China for which the income has a de facto relationship with the offices or premises in China.
Article 24Where dividends, bonus issues or other returns on equity investment gains from sources outside China are distributed to a resident enterprise by a foreign enterprise controlled directly or indirectly by the resident enterprise, the portion of overseas income tax paid by the foreign enterprise for the said gains which is part of corporate income tax may be set-off against the amount of overseas income tax payable by the resident enterprise within the tax set-off limits stipulated in Article 23.
Chapter 4 — Tax Incentives
Article 25The State grants corporate income tax incentives to key industries and projects supported and encouraged by the State.
Article 26The following enterprise income shall be tax-exempt income:
(1) income from interest on treasury bonds;
(2) gains from dividends, bonus issues or other returns on equity investment between qualified resident enterprises;
(3) gains from dividends, bonus issues or other returns on equity investment obtained by a non-resident enterprise with an office or premises established in China, from a resident enterprise which has a de facto relationship with the offices or premises; and
(4) income of qualified non-profit organisations.
Article 27Corporate income tax may be reduced or exempted for the following enterprise income:
(1) income from agriculture, forestry, husbandry and fishery projects;
(2) income from investment in and operation of key public infrastructure projects supported by the State;
(3) income from qualified environmental protection, energy conservation and water conservation projects;
(4) income from qualified technology transfer projects; and
(5) income stipulated under the third paragraph of Article 3.
Article 28Corporate income tax for qualified small profit enterprises shall be at a reduced tax rate of 20%.
Corporate income tax for key advanced and new technology enterprises supported by the State shall be at a reduced tax rate of 15%.
Article 29The autonomous agency of an ethnic autonomous region may reduce or exempt the autonomous region's share of entitlement to corporate income tax payable by enterprises of the ethnic autonomous regions. The decision of an autonomous prefecture or autonomous county to reduce or exempt corporate income tax must be submitted to the People's Government of the relevant province, autonomous region or centrally-administered municipality for approval.
Article 30The following expenditure of an enterprise may be deducted when computing the taxable amount of income:
(1) research and development expenses for the development of new technologies, new products and new processes;
(2) wage payments for placement arrangements of disabled employee and other employees as encouraged by the State.
Article 31Where venture capital enterprises engage in key venture capital investments supported and encouraged by the State, the taxable amount of income may be set-off against a certain percentage of the investment amount.
Article 32Where accelerated depreciation of an enterprise's fixed assets is necessary as a result of advancement in technology, the total number of years of depreciation may be reduced or an accelerated depreciation method may be adopted.
Article 33Income from the consolidated utilisation of resources and the manufacture of products which comply with State industrial policy provisions may be deducted when computing the taxable amount of income.
Article 34Investments by an enterprise in the acquisition of special facilities for environmental protection, energy conservation, water conservation, work safety and other special facilities may be set-off against the taxable amount based on a certain percentage.
Article 35Specific measures on tax incentives stipulated by this Law shall be formulated by the State Council.
Article 36The State Council may, pursuant to the needs of the national economy and social development or any major effect that unexpected events may have on enterprise business activity, formulate special incentive policies for corporate income tax and file records with the Standing Committee of the National People's Congress.
Chapter 5 — Deduction at Source
Article 37Income tax over non-resident enterprise income pursuant to the provisions of the third paragraph of Article 3 shall be subject to withholding at the source, where the payor shall act as the withholding agent. The tax amount for each payment made or due shall be withheld by the withholding agent from the amount paid or payable.
Article 38The tax authorities may designate the payor of project fees or labour service fees as the withholding agent to withhold income tax over non-resident enterprise income derived in China from projects or the provision of labour services.
Article 39Where a withholding agent fails to withhold tax or perform tax withholding obligations pursuant to the provisions of Article 37 and Article 38, the taxpayer shall pay tax at the place where the income is derived. Where the taxpayer fails to pay tax pursuant to law, the tax authorities may demand payment of the tax amount payable, from a payor of the taxpayer with payable tax amounts from other taxable income items in China.
Article 40Withholding agents shall turn over tax withheld to the Treasury within seven days from the date of withholding and file a corporate income tax withholding report with the tax authorities at their location.
Chapter 6 — Special Tax Adjustment
Article 41Where business dealings between an enterprise and its interested parties fail to comply with the independent transaction principle, and reductions are made to the taxable income or the amount of income of the enterprise or its interested parties, the tax authorities have a right to make adjustments according to a reasonable method.
Where intangible assets are jointly developed or transferred by an enterprise and its interested party, or labour services are jointly provided or received by an enterprise and its interested party, costs shall be apportioned according to the independent transaction principle when computing the taxable amount of income.
Article 42An enterprise may propose the pricing principle and computation method for business dealings between the enterprise and its interested parties to the tax authorities. Pre-determined pricing arrangements shall be concluded after negotiation and confirmation between the tax authorities and the enterprise.
Article 43An enterprise shall attach an annual interested party business dealings report for all business dealings between the enterprise and its interested parties when filing annual corporate income tax returns.
Where the tax authorities conduct investigations into interested party business dealings, the enterprise and its interested parties and other enterprises related to the interested party business dealing under investigation shall provide the relevant information pursuant to the provisions.
Article 44Where an enterprise fails to provide information on a business dealing between the enterprise and its interested parties, or provides false or incomplete information which fails to reflect the true nature of the interested party business dealing, the tax authorities have the right to determine the taxable amount of income pursuant to law.
Article 45Where the actual tax burden of an establishment controlled by a resident enterprise or by a resident enterprise jointly with Chinese residents, is clearly lower than an enterprise in a country (region) stipulated in the first paragraph of Article 4, and any undistributed or reduced distribution of profit does not result from reasonable operational needs, the share of the said profit attributable to the resident enterprise shall be included as income of the resident enterprise for the current period.
Article 46The interest expenditure incurred by an enterprise for the proportion of debt securities investments and equity investments made by its interested parties which exceed stipulated standards shall not be deducted when computing the taxable amount of income.
Article 47Where the taxable income or amount of income of an enterprise is reduced as a result of arrangements with no reasonable commercial objectives implemented by the enterprise, the tax authorities have a right to make adjustments according to a reasonable method.
Article 48Where the tax authorities have made tax adjustments pursuant to the provisions of this chapter and the taxpayer is required to make up outstanding tax payments, the additional tax amount shall be levied and collected with interest pursuant to the provisions of the State Council.
Chapter 7 — Administration of Levying and Collection
Article 49The administration of levying and collection of corporate income tax shall comply with the provisions of this Law and the provisions of the Law of the People's Republic of China on Administration of Tax Levying and Collection.
Article 50Unless tax laws and administrative regulations provide otherwise, the place of incorporation shall be the location for tax payment by a resident enterprise; and the place of the actual management office shall be the location for tax payment by enterprises incorporated overseas.
Where a resident enterprise has established a non-legal-person business entity in China, corporate income tax shall be computed and paid in a consolidated basis.
Article 51Where a non-resident enterprise derives income pursuant to the second paragraph of Article 3, the office or premises of the entity shall be the location for tax payment. Where a non-resident enterprise has established two or more offices or premises in China, the non-resident enterprise may, upon examination and approval by the tax authorities, arrange for its main office or premises to pay tax in a consolidated basis.
Where a non-resident enterprise derives income pursuant to the third paragraph of Article 3, the location of the withholding agent shall be the venue for tax payment.
Article 52Unless the State Council stipulates otherwise, enterprises shall not make combined payments of enterprise income tax.
Article 53Corporate income tax shall be computed based on a tax year. A tax year commences in 1 January and ends in 31 December of a calendar year.
Where an enterprise commences operations or terminates business activities during a tax year and the actual period of business operations within the tax year is less than 12 months, the actual period of business operations shall be deemed as a tax year.
When an enterprise undergoes liquidation pursuant to law, the period of liquidation shall be deemed as a tax year.
Article 54Corporate Income Tax shall be prepaid on a monthly or quarterly basis.
Enterprises shall file corporate income tax returns with the tax authorities and prepay tax within 15 days after each month or quarter ends.
Enterprises shall file annual corporate income tax returns with the tax authorities within five months after each year ends, compute the tax payment and settle tax payments and refunds.
Enterprises shall attach the financial accounting report and other relevant materials pursuant to the provisions when filing corporate income tax returns.
Article 55Where business activity is terminated by an enterprise during the year, it shall compute and settle corporate income tax for the current period with the tax authorities within 60 days after the date of termination of operations.
The enterprise shall compute the income, file tax returns with the tax authorities and pay corporate income tax before completing de-registration formalities.
Article 56Corporate income tax paid pursuant to this Law shall be computed in Renminbi. Where the computation is made in a currency other than Renminbi, a Renminbi conversion shall be made for tax payment purposes.
Chapter 8 — Supplementary Provisions
Article 57Enterprises approved and incorporated prior to the promulgation of this Law and subject to low tax rates pursuant to tax laws and administrative regulations may implement a progressive transition to the tax rates stipulated in this Law within five years from the implementation of this Law pursuant to the provisions of the State Council; enterprises entitled to tax reductions and exemptions for a fixed period may, upon implementation of this Law, continue to enjoy the entitlements until the fixed period expires; but the preferential treatment period shall commence from the year of implementation of this Law for enterprises which have yet to make a profit to enjoy the entitlement.
Advanced and new technology enterprises in statutory designated areas for foreign economic cooperation and technological exchange, and advanced and new technology enterprises in areas where special regional policies of the State Council are implemented, may be entitled to transitional tax incentives; the specific measures shall be stipulated by the State Council.
Other encouraged enterprises determined by the State shall be entitled to tax reduction and exemption incentives pursuant to the provisions of the State Council.
Article 58Where any tax treaty concluded between the Government of the People's Republic of China and a foreign government contains provisions which differ from the provisions of this Law, the provisions of the relevant tax treaty shall prevail.
Article 59The State Council shall formulate the implementation regulations pursuant to this Law.
Article 60This Law shall be effective 1 January 2008. The Corporate Income Tax Law of the People's Republic of China for Foreign Investment Enterprises and Foreign Enterprises adopted by the fourth session of the Seventh National People's Congress on 9 April 1991 and the Provisional Regulations of the People's Republic of China on Corporate Income Tax promulgated by the State Council on 13 December 1993 shall be repealed simultaneously.
Implementation Regulations for the Corporate Income Tax Law of the People's Republic of China
Promulgation Authorities: State Council
Promulgation Date: 2007.12.06
Effective Date: 2008.01.01
Validity Status: valid
Document Number: State Council Order No. 512
Implementation Regulations for the Corporate Income Tax Law of the People's Republic of China
Decree of the State Council No. 512
6 December 2007
CHAPTER 1 — GENERAL PRINCIPLES
Article 1These Regulations are formulated pursuant to the provisions of the Corporate Income Tax Law of the People's Republic of China (hereinafter referred to as the "Corporate Income Tax Law").
Article 2Enterprises wholly-owned by an individual and partnership enterprises referred to in Article 1 of the Corporate Income Tax Law shall mean enterprises wholly-owned by an individual and partnership enterprises established pursuant to the laws and administrative regulations of China.
Article 3Enterprises incorporated in China pursuant to the law referred to in Article 2 of the Corporate Income Tax Law shall include enterprises, institutions and social bodies and other organisations established in China pursuant to the laws and administrative regulations of China which derive income.
Enterprises incorporated pursuant to the laws of foreign countries (regions) referred to in Article 2 of the Corporate Income Tax Law shall include enterprises and other organisations established pursuant to the laws of foreign countries (regions) which derive income.
Article 4Actual management organisations referred to in Article 2 of the Corporate Income Tax Law shall mean organisations implementing substantive and comprehensive management and control over the production and business operations, staff, accounts and property etc. of an enterprise.
Article 5Offices and premises referred in the third paragraph of Article 2 of the Corporate Income Tax Law shall mean organisations engaging in production and business activities in China and premises where such production and business activities are carried out, including:
(1) management offices, business organisations and offices;
(2) factories, farms and premises where exploration of natural resources is carried out;
(3) premises where labour services are provided;
(4) premises where construction, installation, assembly, repair and survey projects etc. are carried out; and
(5) any other organisations engaging in production and business activities and any other premises where production and business activities are carried out.
Where a non-resident enterprise entrusts a business agent to engage in production and business activities in China on its behalf, including entrusting an organisation or an individual to sign contracts frequently on its behalf or to handle storage or delivery of goods etc.., such a business agent shall be deemed as an office or premises established by the non-resident enterprise in China.
Article 6Income referred to in Article 3 of the Corporate Income Tax Law shall mean the income from sale of goods, income from provision of labour services, income from transfer of property, income from equity investments such as dividends and bonuses etc.., interest income, rental income, income from royalties, income from donations and gifts and any other income.
Article 7Income sourced from China or overseas referred to in Article 3 of the Corporate Income Tax Law shall be determined pursuant to the following principles:
(1) income from sale of goods shall be determined pursuant to the place where the transactions occur;
(2) income from provision of labour services shall be determined pursuant to the place where the labour services occur;
(3) for income from transfer of property, income from transfer of immovables shall be determined pursuant to the location of the immovables and income from transfer of movables shall be determined pursuant to the location of the enterprise, the office or the premises making the transfer; income from equity investments shall be determined pursuant to the location of the investee enterprise;
(4) income from equity investments such as dividends and bonuses etc. shall be determined pursuant to the location of the enterprise making the distribution of income;
(5) interest income, rental income and income from royalties shall be determined pursuant to the location of the enterprise, the office or the premises bearing or making payment of the income or the place of residence of an individual bearing or making payment of the income; and
(6) any other income shall be determined by the finance and tax departments of the State Council.
Article 8Actual liaison referred to in Article 3 of the Corporate Income Tax Law shall mean that an organisation or office established in China by a non-resident enterprise owns equity and creditor's rights which derives income and owns, manages or controls property which derives income.
CHAPTER 2 — TAXABLE AMOUNT OF INCOME
Section 1 — General Provisions
Article 9Unless otherwise stipulated in these Regulations or by the finance and tax departments of the State Council, the computation of taxable amount of income of an enterprise shall be based on the accrual principle and income and expenditure for the current period shall be deemed as income and expenditure for the current period regardless if the amount is received or paid; income and expenditure which does not belong to the current period shall not be deemed as income and expenditure for the current period even if the amount is received or paid in the current period.
Article 10Losses referred to in Article 5 of the Corporate Income Tax Law shall mean that the balance after deduction of non-taxable income, tax exempt income and various deductions from the total income amount for each tax year by an enterprise pursuant to the provisions of the Corporate Income Tax Law and these Regulations is a negative amount.
Article 11Income from liquidation referred to in Article 55 of the Corporate Income Tax Law shall mean the balance after deduction of net asset value of the property, liquidation expenses and related taxes and fees from the realisable value or transaction price of all the properties of an enterprise.
The part of remaining assets distributed from a liquidated enterprise to an investing enterprise which is distributed from the cumulative undistributed profit and cumulative surplus reserve of the liquidated enterprise shall be determined as dividend income; the part of the balance after deducting the aforesaid dividend income from the remaining assets which exceeds or is less than the investment cost shall be determined as income or loss from transfer of investment properties.
Section 2 — Income
Article 12Income in currency form derived by an enterprise referred to in Article 6 of the Corporate Income Tax Law shall include cash, deposit, accounts receivable, notes receivable, bond investment which is intended to be held to maturity and forfeiture of debts etc..
Income in non-currency form derived by an enterprise referred to in Article 6 of the Corporate Income Tax Law shall include fixed assets, biological assets, intangible assets, equity investments, inventory, bond investment which is not intended to be held to maturity, labour services and the related interests etc..
Article 13The amount of income in non-currency form derived by an enterprise referred to in Article 6 of the Corporate Income Tax Law shall be determined according to the fair value.
The fair value referred to in the preceding paragraph shall mean the value determined according to market price.
Article 14Income from sale of goods referred in item (1) of Article 6 of the Corporate Income Tax Law shall mean the income derived by an enterprise from sale of commodities, products, raw materials, packaging materials, low-value consumables and any other inventory.
Article 15Income from provision of labour services referred to in item (2) of Article 6 of the Corporate Income Tax Law shall mean the income derived by an enterprise engaging in construction and installation, repair, transportation, warehouse leasing, financial and insurance, postal and telecommunications, consultancy and brokerage, culture and sports, scientific research, technical services, education and training, food and beverage and accommodation, intermediary and agency, healthcare, community services, tourism, entertainment, processing and any other labour services and activities.
Article 16Income from transfer of property referred to in item (3) of Article 6 of the Corporate Income Tax Law shall mean the income derived by an enterprise from transfer of fixed assets, biological assets, intangible assets, equity and creditor's rights etc..
Article 17Gains from equity investments such as dividends and bonuses etc.. referred to in item (4) of Article 6 of the Corporate Income Tax Law shall mean the income derived by an enterprise from an investee in relation to equity investment.
Unless otherwise stipulated by the finance and tax departments of the State Council, the realisation of income from gains from equity investments such as dividends and bonuses etc.. shall be determined according to the date of the investee's decision to distribute profits.
Article 18Interest income referred to in item (5) of Article 6 of the Corporate Income Tax Law shall mean the income derived by an enterprise through provision of funds to others which do not constitute equity investment or through funds of the enterprise used by others, including interest on deposits, loan interest, bond interest and arrears interest etc..
Interest income shall be realised on the date on which interest is payable by the debtor pursuant to contractual provisions.
Article 19Rental income referred to in item (6) of Article 6 of the Corporate Income Tax Law shall mean the income derived by an enterprise through provision of the right of use of fixed assets, packaging materials or any other tangible assets.
Rental income shall be realised on the date on which rental is payable by the lessee pursuant to contractual provisions.
Article 20Income from royalties referred to in item (7) of Article 6 of the Corporate Income Tax Law shall mean the income derived by an enterprise through provision of the right of use of patent rights, non-patented technologies, trademark rights, copyright and any other concession rights.
Income from royalties shall be realised on the date on which concession right fee is payable by the user pursuant to contractual provisions.
Article 21Income from gifts and donations referred to in item (8) of Article 6 of the Corporate Income Tax Law shall mean the income in currency form and non-currency form received by an enterprise from an enterprise, organisation or individual for free.
Income from donation or gift shall be realised on the date of receipt of the donation or gift.
Article 22Any other income referred to in item (9) of Article 6 of the Corporate Income Tax Law shall mean any other income derived by an enterprise other than income stipulated in item (1) to item (8) of Article 6 of the Corporate Income Tax Law, including enterprise asset overage, overdue unrefunded security deposit income, accounts payable in arrears, accounts receivables collected after write-off as bad debt, debt restructuring income, subsidy income, default penalty income and exchange gain etc..
Article 23The following income from the following production and business activities of an enterprise may be realised in phases:
(1) for sale of goods for payment under an installment plan, the income shall be realised on the dates of receipt of payment pursuant to contractual provisions; and
(2) for enterprises entrusted to process or manufacture large machinery equipment, vessel, aircraft and enterprises engaging in construction, installation, assembly businesses or provision of labour services, the income shall be realised according to the completed work schedule or workload within a tax year if the project is ongoing for more than 12 months.
Article 24Where income is derived through product sharing, the income shall be realised on the date of distribution of products to the enterprise and the income amount shall be determined according to the fair value of the products.
Article 25Unless otherwise stipulated by the finance and tax departments of the State Council, where an enterprise exchanges non-currency assets and donates goods, property or labour services or use goods, property or labour services for debt settlement, sponsorship, fund raising, advertisement, samples, staff welfare or profit distribution purposes, it shall be deemed as sale of goods, transfer of property or provision of labour services.
Article 26Unless otherwise stipulated by the State Council or the finance and tax departments of the State Council, financial allocation referred to in item (1) of Article 7 of the Corporate Income Tax Law shall mean the funds allocated by various levels of people's governments to institutions and social organisations etc.. which are under budget administration.
Administrative and institutional expenses referred to in item (2) of Article 7 of the Corporate Income Tax Law shall mean the expenses collected from specific targets in the course of implementation of public administration and provision of public services to citizens, legal persons or other organisations pursuant to the relevant provisions of laws and regulations and as approved by the stipulated procedures of the State Council and such funds collected are under treasury administration.
Government funds referred to in item (2) of Article 7 of the Corporate Income Tax Law shall mean government funds collected by enterprises for specific purposes pursuant to the relevant provisions of laws and administrative regulations on behalf of the government.
Other non-taxable income stipulated by the State Council referred to in item (3) of Article 7 of the Corporate Income Tax Law shall mean government funds obtained by enterprises to be used for specific purposes as stipulated by the finance and tax departments of the State Council and as approved by the State Council.
Section 3 — Deductions
Article 27Related expenditure referred to in Article 8 of the Corporate Income Tax Law shall mean the expenditure that is directly related to income derived.
Reasonable expenditure referred to in Article 8 of the Corporate Income Tax Law shall mean the necessary and normal expenditure which complies with the norms of production and business activities and which should be included in the profit and loss in the current period or in the relevant asset costs.
Article 28Expenditure incurred by an enterprise shall be classified as revenue expenditure and capital expenditure. Revenue expenditure shall be deducted directly for the period in which it occurs; capital expenditure shall be deducted for different periods or be included in the relevant asset costs and shall not be deducted directly for the period in which it occurs.
The expenses or property arising from the application of the non-taxable income of an enterprise to expenditure shall not be deductible or be used for computation of deduction for the corresponding depreciation and amortisation.
Unless otherwise stipulated in the Corporate Income Tax Law and these Regulations, costs, expenses, taxes, losses and any other expenditure incurred by an enterprise shall be deducted only once.
Article 29Costs referred to in Article 8 of the Corporate Income Tax Law shall mean the selling cost, cost of sales, business expenditure and any other consumption incurred by an enterprise in the production and business activities.
Article 30Expenses referred to in Article 8 of the Corporate Income Tax Law shall mean the selling expenses, management expenses and financial expenses incurred by an enterprise in production and business activities, except for those related expenses which have been included in costs.
Article 31Taxes referred to in Article 8 of the Corporate Income Tax Law shall mean all taxes and surcharges incurred by an enterprise other than Corporate Income Tax and deductible value-added tax.
Article 32Losses referred to in Article 8 of the Corporate Income Tax Law shall mean loss, damage, scrap loss of fixed assets and inventory, loss from transfer of property, loss from doubtful debt, loss from bad debt, loss incurred due to force majeure such as natural disaster and any other losses incurred by an enterprise in the course of production and business activities.
The balance amount after deducting compensation from the liable party and insurance compensation from the losses incurred by an enterprise shall be deductible pursuant to the provisions of the finance and tax departments of the State Council.
Where an enterprise has treated an asset as loss but recovers all or part of the asset in a subsequent tax year, the income from such recovery shall be included in the income for current period.
Article 33Any other expenditure referred to in Article 8 of the Corporate Income Tax Law shall mean reasonable expenditure relating to production and business activities incurred by an enterprise in production and business activities other than costs, expenses, taxes and losses.
Article 34Reasonable expenditure of wages and salaries incurred by an enterprise shall be deductible.
Wages and salaries referred to in the preceding paragraph shall mean all labour remuneration in cash form or non-cash form paid by an enterprise in each tax year to its existing employees, including basic wage, bonus, subsidies, allowances, year-end wage increment, overtime wage and any other expenditure relating to the employment of existing employees.
Article 35Basic social security insurance premiums and basic housing provident funds such as basic pension insurance premiums, basic medical insurance premiums, unemployment insurance premiums, work injury insurance premiums, family planning insurance premiums contributed by an enterprise for its employees pursuant to the scope and standards stipulated by the relevant departments of the State Council or the provincial people's government shall be deductible.
Supplementary pension insurance premiums and supplementary medical insurance premiums paid by an enterprise for its investors or employees within the scope and standards stipulated by the finance and tax departments of the State Council shall be deductible.
Article 36Except for personal safety insurance premiums stipulated by the State and any other commercial insurance premiums stipulated by the finance and tax departments of the State Council paid by an enterprise for its employees holding special job positions, commercial insurance premiums paid by an enterprise for its investors or employees shall not be deductible.
Article 37Reasonable borrowing expenses incurred by an enterprise in production and business activities which need not be capitalised shall be deductible.
Where an enterprise makes borrowings for procurement or construction of fixed assets, intangible assets and inventory which attains saleable status after a construction period of 12 months or more, the borrowing expenses incurred during the procurement or construction period of the relevant assets shall be included in the costs of the relevant assets as capital expenditure and shall be deductible pursuant to the provisions of these Regulations.
Article 38The following interest expenditure incurred by an enterprise in production and business activities shall be deductible:
(1) interest expenditure for borrowings made by a non-financial enterprise from a financial enterprise, interest expenditure for all deposits and interest expenditure for interbank borrowings of a financial enterprise and interest expenditure for approved bonds issued by an enterprise;
(2) interest expenditure for borrowings made by a non-financial enterprise from a non-financial enterprise which does not exceed the amount computed according to the interest rate for same type of loans of a financial enterprise during the same period.
Article 39Exchange loss incurred by an enterprise in currency trading and from conversion of non-Renminbi-denominated monetary assets and debts at the end of a tax year into Renminbi using the middle price of spot exchange rate for Renminbi shall be deductible except for the portion which has been included in the costs of the relevant assets or which relates to profit distribution to owners.
Article 40Staff welfare expenditure incurred by an enterprise which does not exceed 14% of the total amount of wages and salaries shall be deductible.
Article 41Labour union expenditure allocated by an enterprise which does not exceed 2% of the total amount of wages and salaries shall be deductible.
Article 42Unless otherwise stipulated by the finance and tax departments of the State Council, vocational training expenditure incurred by an enterprise which does not exceed 2.5% of the total amount of wages and salaries shall be deductible; the excess portion shall be carried forward to subsequent tax years for deduction.
Article 43Business entertainment expenditure relating to production and business activities incurred by an enterprise shall be deductible based on 60% of the incurred amount and the maximum deduction shall not exceed 0.5% of the sales (business) revenue of the current year.
Article 44Unless otherwise stipulated by the finance and tax departments of the State Council, advertising fee and business promotion expenditure incurred by an enterprise which satisfy the requirements and do not exceed 15% of the sales (business) revenue of the current year shall be deductible; the excess portion shall be carried forward to subsequent tax years for deduction.
Article 45Special funds allocated by an enterprise for environmental protection and ecological restoration etc.. pursuant to the relevant provisions of laws and administrative regulations shall be deductible. Where the aforesaid special funds are used for a different purpose after allocation, such funds shall not be deductible.
Article 46Premiums paid by an enterprise for property insurance pursuant to the provisions shall be deductible.
Article 47Lease fees paid by an enterprise for lease of fixed assets required for production and business activities shall be deductible as follows:
(1) lease fee expenditure incurred in lease of fixed assets by way of a business lease shall be deducted equally over the lease period; and
(2) depreciation expenses shall be allocated for the portion of lease fee expenditure incurred in lease of fixed assets by way of a finance lease which constitutes the value of fixed assets on finance lease pursuant to the provisions and deducted over several periods.
Article 48Reasonable labour protection expenditure incurred by an enterprise shall be deductible.
Article 49Management fees paid between enterprises, rental and royalties paid between internal business units of an enterprise and interest paid between the internal business units of a non-bank enterprise shall not be deductible.
Article 50Where an office or premises established in China by a non-resident enterprise is able to show documentary proof of the scope of expenses consolidation, quota, basis and method of distribution etc.. issued by the head office in respect of the expenses incurred by the overseas head office in relation to the production and business activities of the office or premises and such expenses can be reasonably shared, the expenses shall be deductible.
Article 51Charitable donations referred to in Article 9 of the Corporate Income Tax Law shall mean charitable donations made by an enterprise to charitable causes stipulated in the Law of the People's Republic of China on Charitable Donations through charitable bodies or People's Governments of county level and above and their departments.
Article 52A charitable body referred to in Article 51 of these Regulations shall mean a social organisation such as a fund or a charitable organisation which satisfies the following conditions:
(1) it is duly registered and qualifies as a legal person;
(2) it is non-profit oriented and established for charitable causes;
(3) all its assets and appreciation thereof are owned by the legal person;
(4) the gains and operational balances are mainly used for charitable causes which comply with the objective for establishment of the legal person;
(5) the remaining property after termination shall not belong to any individual or profit-oriented organisation;
(6) it shall not engage in businesses which are unrelated to the objective of its establishment;
(7) it has a proper financial accounting system;
(8) the donors do not participate in distribution of the property of the social organisation in any manner; and
(9) it satisfies any other conditions stipulated by the finance and tax departments of the State Council in consultation with the civil affairs department etc. of the State Council.
Article 53Charitable donation expenditure incurred by an enterprise which does not exceed 12% of the total annual profit shall be deductible.
Total annual profit shall mean the annual accounting profit computed by an enterprise pursuant to the unified accounting system of the State.
Article 54Sponsorship expenditure referred to in item (6) of Article 10 of the Corporate Income Tax Law shall mean all non-advertisement expenditure incurred by an enterprise which is unrelated to production and business activities.
Article 55Expenditure out of capital reserves that has yet been audited and determined referred to in item (7) of Article 10 of the Corporate Income Tax Law shall mean expenditure out of capital reserves such as asset impairment provision and risk provision which does not comply with the provisions of the finance and tax departments of the State Council.
Section 4 — Tax Treatment for Assets
Article 56Tax computation for all assets of an enterprise, including fixed assets, biological assets, intangible assets, long-term deferred expenses, investment assets and inventory etc.. shall be based on historical cost.
Historical cost referred to in the preceding paragraph shall mean the actual expenditure incurred by an enterprise at the time of obtaining the asset.
Where there is asset appreciation or impairment during the holding period of various assets, the tax base of such assets shall not be adjusted except where the finance and tax departments of the State Council stipulate that the losses or gains may be determined.
Article 57Fixed assets referred to in Article 11 of the Corporate Income Tax Law shall mean non-monetary assets held or used by an enterprise for more than 12 months for the purpose of manufacturing of products, provision of labour services, lease or business management, including houses, buildings, machines, machinery, transport vehicles and equipment, apparatuses and tools etc. relating to production and business activities.
Article 58Tax bases for fixed assets shall be determined as follows:
(1) for fixed assets purchased from external parties, the tax base shall be the purchase price and the related taxes and fees paid and any other expenditure which directly contributes to the attainment of the expected purpose of use of the assets;
(2) for self-constructed fixed assets, the tax base shall be the expenditure incurred before completion settlement;
(3) for fixed assets on a finance lease, the tax base shall be the total amount of payment stipulated in the lease contract and the related expenses incurred by the lessee in the course of execution of the lease contract; where the total amount of payment is not
stipulated in the lease contract, the tax base shall be the fair value of the assets and the related expenses incurred by the lessee in the course of execution of the lease contract;
(4) for inventory gains in fixed assets, the tax base shall be the full replacement value of the same type of fixed assets;
(5) for fixed assets obtained through donation, gift, investment, exchange of non-monetary assets, debt restructuring etc., the tax base shall be the fair value of the assets and related taxes and fees paid; and
(6) for fixed assets which are altered, the tax base shall include the alteration expenditure incurred in the course of alteration, except for expenditure stipulated in item (1) and item (2) of Article 13 of the Corporate Income Tax Law.
Article 59Straight-line depreciation of fixed assets shall be deductible.
Depreciation of fixed assets shall commence in the month following the commencement of use; for fixed assets which cease to be used, depreciation shall cease in the month following the cessation of use.
An enterprise shall determine the estimated net residual value of a fixed asset reasonably according to the nature and usage of the fixed asset. The estimated net residual value of a fixed asset, once determined, shall not be changed.
Article 60Unless otherwise stipulated by the finance and tax departments of the State Council, the minimum period of depreciation of fixed assets shall be as follows:
(1) 20 years for houses and buildings;
(2) 10 years for aircrafts, trains, vessels, machines, machinery and other production equipment;
(3) five years for apparatuses, tools and furniture etc.. related to production and business activities;
(4) four years for transport vehicles other than aircrafts, trains and vessels; and
(5) three years for electronic devices.
Article 61For enterprises engaging in exploration of mineral resources such as petroleum and natural gases etc.., the expenses incurred before commencement of commercial production and the depletion and depreciation of the relevant fixed asset shall be separately formulated by the finance and tax departments of the State Council.
Article 62Tax bases for biological assets shall be determined as follows:
(1) for biological assets used in production which are purchased from external parties, the tax base shall be the purchase price and the related taxes and fees paid; and
(2) for biological assets used in production which are obtained through donation, gift, exchange of non-monetary assets, debt restructuring etc.., the tax base shall be the fair value of the assets and the related taxes and fees paid.
Biological assets used in production referred to in the preceding paragraph shall mean biological assets held by an enterprise for the purpose of production of agricultural
products, provision of labour services or lease etc.., including economic forest, firewood forest, animal husbandry and draught animals etc..
Article 63Straight-line depreciation of biological assets used in production shall be deductible.
Depreciation of biological assets used in production shall commence in the month following the commencement of use; for biological assets used in production which cease to be used, depreciation shall cease in the month following the cessation of use.
An enterprise shall determine the estimated net residual value of biological assets used in production reasonably according to the nature and usage of the biological assets used in production. The estimated net residual value of biological assets used in production, once determined, shall not be changed.
Article 64The minimum period of depreciation for biological assets used in production shall be as follows:
(1) 10 years for biological assets used in production in the forest category; and
(2) three years for biological assets used in production in the animal category.
Article 65Intangible assets referred to in Article 12 of the Corporate Income Tax Law shall mean long-term non-currency assets in non-tangible form held by an enterprise for the purpose of production of products, provision of labour services, lease or business management, including patent rights, trademark rights, copyright, land use right, non-patented technologies, goodwill etc..
Article 66The tax base of intangible assets shall be determined as follows:
(1) for intangible assets purchased from external parties, the tax base shall be the purchase price and the related taxes and fees paid and any other expenditure which directly contributes to the attainment of the expected purpose of use of the assets;
(2) for self-developed intangible assets, the tax base shall be the expenditure incurred in the course of development from the assets' satisfaction of capitalisation conditions up to the assets' attainment of the expected purpose of use; and
(3) for intangible assets obtained through donation, gift, exchange of non-monetary assets, debt restructuring etc.., the tax base shall be the fair value of the assets and the related taxes and fees paid.
Article 67Straight-line amortisation expenses of intangible assets shall be deductible.
The amortisation period of intangible assets shall not be less than 10 years.
For intangible assets which are invested or transferred and the period of use is stipulated in the relevant laws or the contract, the intangible assets may be amortised pursuant to the stipulated or agreed period of use.
Expenditure incurred in externally purchased goodwill shall be deductible at the time of whole transfer or liquidation of an enterprise.
Article 68Alteration expenditure of fixed assets referred to in item (1) and item (2) of Article 13 of the Corporate Income Tax Law shall mean the expenditure incurred in the alteration of the structure of houses or buildings or extension of the period of use etc..
Expenditure stipulated in item (1) of Article 13 of the Corporate Income Tax Law shall be amortised over the estimated remaining useful life of the fixed assets; expenditure stipulated in item (2) shall be amortised over the remaining lease term stipulated in the contract.
Except for the provisions of item (1) and item (2) of Article 13 of the Corporate Income Tax Law, the depreciation period shall be extended accordingly if the useful life of a fixed asset is extended after alteration.
Article 69Overhaul expenditure of fixed assets referred to in item (3) of Article 13 of the Corporate Income Tax Law shall mean expenditure which satisfies the following conditions:
(1) where the repair expenditure reaches 50% or more of the tax base at the time of obtaining the fixed assets; and
(2) where the useful life of the fixed assets is extended by two years or more after the repair.
Expenditure stipulated in item (3) of Article 13 of the Corporate Income Tax Law shall be amortised over the remaining useful life of the fixed assets.
Article 70Other expenditure to be treated as long-term deferred expenses stipulated in item (4) of Article 13 of the Corporate Income Tax Law shall be amortised with effect from the following month upon incurring the expenditure; the amortisation period shall not be less than three years.
Article 71Investment assets referred to in Article 14 of the Corporate Income Tax Law shall mean the assets arising from equity investments and debt securities investments made by an enterprise in external parties.
The costs of investment assets shall be deductible at the time of transfer or disposal of investment assets by an enterprise.
The costs of investment assets shall be determined as follows:
(1) for investment assets which are acquired with cash payment, the cost shall be the purchase price; and
(2) for investment assets which are not acquired with cash payment, the cost shall be the fair value of the assets and the related taxes and fees paid.
Article 72Inventory referred to in Article 15 of the Corporate Income Tax Law shall mean products held by an enterprise for sale, work-in-progress, materials consumed in the course of production or provision of labour services.
The costs of inventory shall be determined as follows:
(1) for inventory acquired with cash payment, the cost shall be the purchase price and the related taxes and fees paid;
(2) for inventory not acquired with cash payment, the cost shall be the fair value of the inventory and the related taxes and fees paid; and
(3) for agricultural products derived from biological assets used in production, the cost shall be the requisite expenditure such as the cost of materials, labour cost and shared indirect expenses etc. incurred in the course of output or harvesting.
Article 73Enterprises may choose a cost accounting method for inventory in use or for sale among the first-in first-out method, weighted average method, specific-unit-cost method and shall not make any changes arbitrarily once the costing method is chosen.
Article 74Net asset value referred to in Article 16 of the Corporate Income Tax Law and net value of property referred to in Article 19 shall mean the balance after deducting depreciation, depletion, amortisation, provision etc.. from the tax base of the relevant assets and property pursuant to the provisions.
Article 75Unless otherwise stipulated by the finance and tax departments of the State Council, an enterprise shall determine the income or loss from transfer of asset at the time of transaction in the course of restructuring; the tax base for the relevant assets shall be re-determined according to the transaction price.
CHAPTER 3 — TAX AMOUNT PAYABLE
Article 76The formula for computation of tax amount payable stipulated in Article 22 of the Corporate Income Tax Law shall be:
Tax amount payable = taxable amount of income × applicable tax rate - tax relief - tax credit
The tax relief and tax credit in the formula shall mean the tax amount payable after reduction, exemption and relief pursuant to tax incentives stipulated in the Corporate Income Tax Law and by the State Council.
Article 77Income tax amount paid overseas referred to in Article 23 of the Corporate Income Tax Law shall mean that an enterprise has paid the Corporate Income Tax for income sourced outside China payable pursuant to overseas tax laws and the relevant provisions.
Article 78Tax set-off limit referred to in Article 23 of the Corporate Income Tax Law shall mean the tax amount payable on income of an enterprise sourced outside China computed pursuant to the provisions of the Corporate Income Tax Law and these Regulations. Unless otherwise stipulated by the finance and tax departments of the State Council, such tax set-off limit shall be computed by country (region) and not by tax items; the formula shall be as follows:
Tax set-off limit = total taxable amount of income for income sourced in China and overseas computed pursuant to the provisions of the Corporate Income Tax Law and these Regulations × taxable amount of income sourced in a particular country (region) ÷ the total taxable amount of income sourced in China and overseas
Article 79The five-year period referred to in Article 23 of the Corporate Income Tax Law shall mean that five tax years have elapsed since the year following the year in which the Corporate Income Tax paid by an enterprise overseas for income sourced overseas exceeded the tax set-off limit.
Article 80Direct control referred to in Article 24 of the Corporate Income Tax Law shall mean that a resident enterprise holds 20% or more of the foreign enterprise by direct shareholding.
Indirect control referred to in Article 24 of the Corporate Income Tax Law shall mean that a resident enterprise holds 20% or more of the shares of a foreign enterprise through indirect shareholding; the specific identifying measures shall be separately formulated by the finance and tax departments of the State Council.
Article 81When an enterprise sets off Corporate Income Tax pursuant to the provisions of Article 23 and Article 24 of the Corporate Income Tax Law, it shall provide the relevant tax payment proof issued by the overseas tax authorities for the tax year in respect of the tax amount.
CHAPTER 4 — TAX INCENTIVES
Article 82Interest income from treasury bonds referred to in item (1) of Article 26 of the Corporate Income Tax Law shall mean the interest income derived by an enterprise through holding of treasury bonds issued by the finance department of the State Council.
Article 83Gains from equity investment between resident enterprises which satisfy the requirements referred to in item (2) of Article 26 of the Corporate Income Tax Law shall mean investment gains derived by a resident enterprise through direct investment in another resident enterprise. Gains from equity investments such as dividends and bonuses etc.. referred to in item (2) and item (3) of Article 26 of the Corporate Income Tax Law shall exclude investment gains obtained for holding listed and circulating shares issued by a resident enterprise for less than 12 months consecutively.
Article 84A non-profit organisation which satisfies the requirements referred to in item (4) of Article 26 of the Corporate Income Tax Law shall mean an organisation which satisfies the following requirements:
(1) it has performed the registration formalities for non-profit organisations pursuant to the law;
(2) it engages in charitable or non-profit activities;
(3) except for reasonable expenditure incurred in relation to the organisation, its revenue is used entirely on registered charitable or non-profit causes stipulated in its articles of association;
(4) its property and yield thereof are not used for distribution;
(5) the remaining property following its cancellation is used for charitable or non-profit causes pursuant to the registration or the provisions of the articles of association or donated by the registration authorities to an organisation of similar nature and objective and a public announcement shall be made;
(6) the contributor(s) shall not retain or enjoy any property right of property contributed to the organisation; and
(7) the wage and welfare expenditure of its staff shall be kept within the stipulated ratio and the property of the organisation shall not be distributed under any pretext.
The method of identifying and administration of non-profit organisations stipulated in the preceding paragraph shall be formulated by the finance and tax departments of the State Council in consultation with the relevant departments of the State Council.
Article 85Unless otherwise stipulated by the finance and tax departments of the State Council, the income of non-profit organisations which satisfy the requirements referred to in item (4) of Article 26 of the Corporate Income Tax Law shall exclude income derived by the non-profit organisation from profitable activities.
Article 86The income of enterprises referred to in item (1) of Article 27 of the Corporate Income Tax Law derived from agricultural, forestry, husbandry and fishing projects may be subject to exemption or reduction of Corporate Income Tax as follows:
(1) The income of an enterprise derived from the following projects shall be exempted from Corporate Income Tax:
(vii) agricultural, forestry, husbandry and fishery projects such as irrigation, primary processing of agricultural products, veterinarian, promotion of agricultural technology, operations and repair and maintenance of agricultural machinery etc..; and
(viii) ocean fishing.
(2) The income of an enterprise derived from the following projects shall be subject to 50% reduction of Corporate Income Tax:
(i) cultivation of flowers, teas and other beverage crops and spices crops; and
(ii) mariculture and inland aquaculture.
Enterprises engaging in restricted and prohibited projects stipulated by the State shall not enjoy the Corporate Income Tax incentives stipulated in this Article.
Article 87Key public infrastructure projects supported by the State referred to in item (2) of Article 27 of the Corporate Income Tax Law shall mean harbour port, airport, railway, highway, urban public transportation, power, water projects etc. stipulated in the Catalogue of Corporate Income Tax Incentives for Public Infrastructure Projects.
Income derived by an enterprise investing and operating a key public infrastructure project supported by the State shall be exempted from Corporate Income Tax for the first year to the third year with effect from the tax year in which the first sum of production and business revenue is derived from the project and be subject to Corporate Income Tax at 50% reduction for the fourth year to the sixth year.
Contracted business projects, contracted construction projects and self-constructed projects for own use of an enterprise under this Article shall not enjoy the Corporate Income Tax incentives stipulated in this Article.
Article 88Environmental protection and energy and water conservation projects which satisfy the requirements referred to in item (3) of Article 27 of the Corporate Income Tax Law shall include public sewage treatment, public garbage treatment, comprehensive development and utilisation of biogas, technological transformation for energy saving and reduced emissions and desalination etc.. The specific requirements and scope of the projects shall be formulated by the finance and tax departments of the State Council in consultation with the relevant departments of the State Council and submitted to the State Council for approval before promulgation and implementation.
Income derived by an enterprise engaging in an environmental protection or energy and water conservation project which complies with the conditions stipulated in the preceding paragraph shall be exempted from Corporate Income Tax for the first year to the third year with effect from the tax year in which the first sum of production and business revenue is derived from the project and be subject to Corporate Income Tax at 50% reduction for the fourth year to the sixth year.
Article 89Where a project which is entitled to the tax reduction and exemption incentives stipulated in Article 87 and Article 88 of these Regulations is transferred within the tax exemption and reduction period, the transferee shall enjoy the stipulated tax reduction and exemption incentives during the remaining term with effect from the date of transfer; where a project is transferred after the tax exemption and reduction period has expired, the transferee shall not be entitled to tax reduction and exemption incentives for the project.
Article 90Exemption and reduction of Corporate Income Tax on income from transfer of technology which satisfies the requirements referred to in item (4) of Article 27 of the Corporate Income Tax Law shall mean that the income from technology transfer of a resident enterprise within a tax year does not exceed RMB5 million shall be exempted from Corporate Income Tax; the part which exceeds RMB5 million shall be subject to Corporate Income Tax at 50% reduction.
Article 91Income stipulated in item (5) of Article 27 of the Corporate Income Tax Law derived by a non-resident enterprise shall be subject to Corporate Income Tax at a reduced tax rate of 10%.
The following income may be exempted from Corporate Income Tax:
(1) interest income derived by foreign governments from provision of loan to the Chinese government;
(2) interest income derived by international financial institutions from provision of preferential loan to the Chinese government and resident enterprises; and
(3) any other income approved by the State Council.
Article 92Qualified small profit enterprises referred to in the first paragraph of Article 28 of the Corporate Income Tax Law shall mean enterprises in industries which are not restricted or prohibited by the State and satisfy the following conditions:
(1) industrial enterprises with annual taxable amount of income below RMB300,000, less than 100 employees and total assets below RMB30 million; and
(2) other enterprises with annual taxable amount of income below RMB300,000, less than 80 employees and total assets below RMB10 million.
Article 93Key advanced and new technology enterprises supported by the State referred to in the second paragraph of Article 28 of the Corporate Income Tax Law shall mean enterprises which own core independent intellectual property and satisfy the following conditions:
(1) the products (services) shall fall under the scope stipulated in the Key Advanced and New Technology Industries Supported by the State;
(2) the ratio of research and development expenses to the sales revenue shall not be lower than the stipulated ratio;
(3) the ratio of revenue from advanced and new technology products (services) to total revenue of the enterprise shall not be lower than the stipulated ratio;
(4) the ratio of technical personnel to all employees of the enterprise shall not be lower than the stipulated ratio; and
(5) satisfy any other conditions stipulated in the identifying and administration measures for advanced and new technology enterprises.
The Key Advanced and New Technology Industries Supported by the State and the identifying and administration measures for advanced and new technology industries shall be formulated by the science and technology, finance and tax departments of the State Council in consultation with the relevant departments of the State Council and submitted to the State Council for approval before promulgation and implementation.
Article 94Ethnic autonomous region referred to in Article 29 of the Corporate Income Tax Law shall mean autonomous districts, autonomous prefectures and autonomous counties implementing ethnic autonomy pursuant to the provisions of the Ethnic Autonomy Law of the People's Republic of China.
Enterprises in restricted and prohibited industries in ethnic autonomous regions shall not enjoy reduction or exemption of Corporate Income Tax.
Article 95Deduction of research and development expenses referred to in item (1) of Article 30 of the Corporate Income Tax Law shall mean that where an enterprise has incurred research and development expenses in the development of new technologies, new products and new processes but intangible assets are yet to be formed and included in the profit and loss for the current period, 50% of the research and development expenses shall be deducted on the basis of actual deduction pursuant to the provisions; where intangible assets are formed, 150% of the cost of intangible assets shall be amortised.
Article 96Deduction of wage payments for placement arrangements of disabled employees referred to in item (2) of Article 30 of the Corporate Income Tax Law shall mean that where an enterprise makes placement arrangements for disabled employees, 100% of the wage payments to disabled employees shall be deducted on the basis of actual deduction. The relevant provisions of the Law of the People's Republic of China on Protection of Disabled Persons shall apply to the scope of disabled employees.
The deduction measures for wages paid by an enterprise to other employees as encouraged by the State referred to in item (2) of Article 30 of the Corporate Income Tax Law shall be separately formulated by the State Council.
Article 97Set off of taxable amount of income referred to in Article 31 of the Corporate Income Tax Law shall mean that where a venture capital enterprise invests in non-listed small and medium advanced and new technology enterprises by way of equity investment for two years or more, the taxable amount of income of the venture capital enterprise may be set off against 70% of the investment amount in the year when the equity has been held for two years; the balance after set off may be carried forward to subsequent tax years for set off.
Article 98Fixed assets which may adopt a shorter depreciation period or the accelerated depreciation method referred to in Article 32 of the Corporate Income Tax Law shall include:
(1) fixed assets subject to technological advancement and faster product updates; and
(2) fixed assets which are always subject to strong vibrations and high corrosion.
Where a fixed asset adopts a shorter depreciation period, the minimum depreciation period shall not be less than 60% of the depreciation period stipulated in Article 60 of these Regulations; where a fixed asset adopts the accelerated depreciation, it may adopt the double declining balance method or the sum-of-years depreciation method.
Article 99Deduction of income referred to in Article 33 of the Corporate Income Tax Law Article shall mean that 90% of the income derived by an enterprise which uses the resources stipulated in the Catalogue for Corporate Income Tax Incentives for Comprehensive Utilisation of Resources as key raw materials to manufacture products which are not restricted or prohibited by the State and which comply with the relevant standards of the State and the industry shall be include in the total income amount.
The ratio of raw materials to the materials used in production of products shall not be lower than the standard stipulated in the Catalogue for Corporate Income Tax Incentives for Comprehensive Utilisation of Resources.
Article 100Set off against tax amount referred to in Article 34 of the Corporate Income Tax Law shall mean that where an enterprise has purchased special equipment for use in environmental protection, energy and water conservation and work safety purposes etc.. stipulated in the Catalogue of Corporate Income Tax Incentives for Special Equipment for Environmental Protection, the Catalogue of Corporate Income Tax Incentives for Special Equipment for Energy and Water Conservation, the Catalogue of Corporate Income Tax Incentives for Special Equipment for Work Safety, 10% of the amount invested in the special equipment may be set off against the enterprise's tax amount payable for the current year; the balance after set off may be carried forward to the following five tax years.
An enterprise which enjoys Corporate Income Tax incentives stipulated in the preceding paragraph must have actually purchased and used the special equipment stipulated in the preceding paragraph; where an enterprise which has purchased the aforesaid special equipment transfers or leases the special equipment within five years, it shall cease to enjoy the Corporate Income Tax incentives and make good Corporate Income Tax which has been set off.
Article 101The catalogue of Corporate Income Tax incentives stipulated in Article 87, Article 99 and Article 100 of this Chapter shall be formulated by the finance and tax departments of the State Council in consultation with the relevant departments of the State
Council and submitted to the State Council for approval before announcement and implementation.
Article 102Where an enterprise engages in projects which are subject to different Corporate Income Tax treatment, income shall be computed for preferential projects individually and period expenses of the enterprise shall be reasonably shared; where the income of the projects is not computed individually, the enterprise shall not enjoy Corporate Income Tax incentives.
CHAPTER 5 — DEDUCTION AT SOURCE
Article 103Where Corporate Income Tax to be paid by a non-resident enterprise is to be withheld at source pursuant to the Corporate Income Tax Law, the taxable amount of income shall be computed pursuant to the provisions of Article 19 of the Corporate Income Tax Law.
Total amount of income referred to in Article 19 of the Corporate Income Tax Law shall mean all prices and other expenses collected by a non-resident enterprise from payors.
Article 104A payor referred to in Article 37 of the Corporate Income Tax Law shall mean an organisation or individual which bears direct obligation to pay the relevant amount to a non-resident enterprise pursuant to the relevant provisions of the laws or contractual provisions.
Article 105Payment referred to in Article 37 of the Corporate Income Tax Law shall include payment in currency or non-currency form such as cash payment, payment by remittance, fund transfer and payment of consideration for interests etc..
Due and payable amounts referred to in Article 37 of the Corporate Income Tax Law shall mean amounts payable by a payor which shall be included in the relevant costs and expenses pursuant to the accrual principle.
Article 106The circumstances where a withholding agent may be appointed pursuant to the provisions of Article 38 of the Corporate Income Tax Law include:
(1) where the expected project period or period for provision of labour services is less than a tax year, and there is proof of declaration of non-performance of tax payment obligations;
(2) where tax registration or provisional tax registration formalities have not been completed and the taxpayer has not appointed an agent in China to perform tax payment obligations on its behalf;
(3) where the tax return for Corporate Income Tax or tax return for prepayment has not been filed within the stipulated period.
A withholding agent stipulated in the preceding paragraph shall be appointed by tax authorities of county level and above and the withholding agent shall be notified of the computation basis for tax withholding, computation method, withholding period and withholding method.
Article 107The place where income is derived referred to in Article 39 of the Corporate Income Tax Law shall mean the place where income is determined pursuant to the principle stipulated in Article 7 of these Regulations. Where income is derived in multiple locations in China, the taxpayer shall select one of the locations to be the venue for filing of tax return and payment of Corporate Income Tax.
Article 108Other income of a taxpayer in China referred to in Article 39 of the Corporate Income Tax Law shall mean income from any other sources derived in China by a taxpayer.
Tax authorities recovering tax payable from a taxpayer shall notify the taxpayer of the reason for recovery, amount to be recovered, payment period and method etc..
CHAPTER 6 — SPECIAL TAX ADJUSTMENT
Article 109An interested party referred to in Article 41 of the Corporate Income Tax Law shall mean an enterprise, organisation or individual related to an enterprise in the following manner:
(1) direct or indirect control over funds, operations, procurement and sales etc..;
(2) under direct or indirect control by the same third party; and
(3) any other interested party relationships.
Article 110Independent transaction principle referred to in Article 41 of the Corporate Income Tax Law shall mean the principle of business dealings according to fair transaction price and business norms between unrelated transaction parties.
Article 111Reasonable methods referred to in Article 41 of the Corporate Income Tax Law shall include:
(1) comparable uncontrolled price method where unrelated transaction parties fix the price according to the price of an identical or similar business transaction;
(2) resale price method where the price is fixed according to the resale price of goods purchased from an interested party and sold to an unrelated transaction party less the gross sales margin for an identical or a similar business transaction;
(3) cost plus method where the price is fixed according to costs plus reasonable expenses and profits;
(4) transaction profit method where the profit is determined according to the net profit derived by unrelated transaction parties in an identical or a similar business transaction;
(5) profit split method where distribution of the consolidated profit or loss is made between an enterprise and its interested party(ies); and
(6) any other method which complies with the independent transaction principle.
Article 112An enterprise may conclude a cost sharing agreement on sharing the costs with its interested party(ies) pursuant to the provisions of the second paragraph of Article 41 of the Corporate Income Tax Law and according to the independent transaction principle.
An enterprise and its interested party(ies) shall share costs pursuant to the principle of matching costs and forecast gains; the relevant information required by the tax authorities shall be submitted to the tax authorities within the period stipulated by the tax authorities.
Where the cost sharing between an enterprise and its interested party(ies) violates the provisions of the first and second paragraphs of this Article, the shared costs shall not be deducted for computation of the taxable amount of income.
Article 113Predetermined pricing arrangements referred to in Article 42 of the Corporate Income Tax Law shall mean that the application submitted by an enterprise to the tax authorities in respect of its pricing principle and computation method for interested party transactions in subsequent years and the agreement reached between the enterprise and the tax authorities following negotiation and pursuant to the independent transaction principle.
Article 114Relevant materials referred to in Article 43 of the Corporate Income Tax Law shall include:
(1) the standards, computation method and explanatory notes on formulation of prices and expenses pertaining to business dealings with interested party(ies) for the relevant period;
(2) information pertaining to the resale (transfer) prices or final selling (transfer) prices of property, property use rights, labour services etc. involved in business dealings with interested party(ies);
(3) information pertaining to comparable product prices, pricing method and profit margin etc.. of the enterprise under investigation which should be provided by other enterprises relating to the investigation on interested party transactions; and
(4) any other information pertaining to business dealings with interested party(ies).
Other enterprises related to the interested party business dealing under investigation referred to in Article 43 of the Corporate Income Tax Law shall mean enterprises that have identical or similar production and business operations as the enterprise under investigation.
An enterprise shall provide information on the standards, computation method and explanatory notes on formulation of prices and expenses pertaining to business dealings with interested party(ies) within the period stipulated by the tax authorities. The interested party(ies) and other enterprises related to the interested party business dealing under investigation shall provide the relevant information within the period as agreed with the tax authorities.
Article 115The tax authorities may adopt the following methods for assessment of the taxable amount of income of an enterprise pursuant to the provisions of Article 44 of the Corporate Income Tax Law:
(1) assessment based on the profit margin of identical or similar enterprises;
(2) assessment based on costs plus reasonable expenses and profit of the enterprise;
(3) assessment based on the reasonable ratio of the overall profit of the interested enterprise group; and
(4) assessment based on any other reasonable method.
An enterprise which disagrees with the taxable amount of income assessed by the tax authorities based on the aforesaid methods stipulated in the preceding paragraph shall
provide the relevant evidence and the tax authorities shall adjust the assessed taxable amount of income upon verification.
Article 116A Chinese resident referred to in Article 45 of the Corporate Income Tax Law shall mean an individual who pays individual income tax in China pursuant to the Individual Income Tax Law of the People's Republic of China for income derived by him/her in China or overseas.
Article 117Control referred to in Article 45 of the Corporate Income Tax Law shall include:
(1) where a resident enterprise or a Chinese resident directly or indirectly holds 10% or more of voting shares solely in a foreign enterprise, and jointly holds 50% or more of the shares in the foreign enterprise; and
(2) where the shareholding percentage of a resident enterprise or a resident enterprise and a Chinese resident has yet to attain the standard stipulated in item (1) but it/they has/have substantive control over the foreign enterprise in terms of shares, funds, operation and procurement and sale etc..
Article 118The actual tax burden is clearly lower than that stipulated in the first paragraph of Article 4 of the Corporate Income Tax Law referred to in Article 45 of the Corporate Income Tax Law shall mean that the actual tax burden is less than 50% of the tax rate stipulated in the first paragraph of Article 4 of the Corporate Income Tax Law.
Article 119Debt securities investment referred to in Article 46 of the Corporate Income Tax Law shall mean financing obtained by an enterprise directly or indirectly from an interested party which requires the enterprise to repay principal and pay interest or make compensation via any other method which calls for payment of interest.
Debt securities investments obtained by an enterprise from an interested party indirectly shall include:
(1) debt securities investments provided by an interested party through an unrelated third party;
(2) debt securities investments provided by an unrelated third party and the interested party provides guarantee and bears joint and several liability; and
(3) any other debt securities investments obtained from an interested party indirectly.
Equity investments referred to in Article 46 of the Corporate Income Tax Law shall mean investments accepted by an enterprise where principal repayment and interest payment are not required and the investor owns the enterprise's net assets.
Standards referred to in Article 46 of the Corporate Income Tax Law shall be separately formulated by the finance and tax departments of the State Council.
Article 120Arrangements with no reasonable commercial objectives referred to in Article 47 of the Corporate Income Tax Law shall mean that the key objectives are the reduction, waiver or postponement of tax payment.
Article 121Where the tax authorities make special tax adjustment for an enterprise pursuant to the provisions of tax laws and administrative regulations, interest shall accrue daily on the tax to be made good during the period from 1 June of the year following the tax year in respect of the tax amount to the date of retrospective tax payment.
The interest accrued in the preceding paragraph shall not be deducted for computation of taxable amount of income.
Article 122Interest referred to in Article 48 of the Corporate Income Tax Law shall be computed using the Renminbi loan benchmark interest rate announced by the People's Bank of China in the tax year in respect of the tax amount for the same period as the retrospective tax payment period plus five percentage points.
An enterprise which provides the relevant information pursuant to the provisions of Article 43 of the Corporate Income Tax Law and these Regulations may compute interest using the benchmark interest rate for Renminbi loan stipulated in the preceding paragraph.
Article 123Where a business dealing between an enterprise and its interested party(ies) does not comply with the independent transaction principle or the enterprise has made other arrangements with no reasonable commercial objectives, the tax authorities shall have the right to make tax adjustment within 10 years from the tax year in which the business dealing occurs.
CHAPTER 7 — ADMINISTRATION OF LEVYING AND COLLECTION
Article 124The place of incorporation of an enterprise referred to in Article 50 of the Corporate Income Tax Law shall mean the place of incorporation of the enterprise pursuant to the relevant provisions of the State.
Article 125An enterprise which computes and pays Corporate Income Tax on a consolidated basis shall compute its taxable amount of income on a consolidated basis; the detailed measures shall be separately formulated by the finance and tax authorities of the State Council.
Article 126The main office or premises referred to in Article 51 of the Corporate Income Tax Law shall satisfy the following conditions:
(1) it shall bear supervision and management responsibilities for the production and business activities of the other offices and premises; and
(2) it shall set up complete accounts and vouchers and must accurately reflect the revenue, costs, expenses and profit and loss of various offices and premises.
Article 127Examination and approval by the tax authorities referred to in Article 51 of the Corporate Income Tax Law shall mean examination and approval by the common higher-level tax authorities of the tax authorities at the locations of various offices and premises.
Where a non-resident enterprise which has obtained approval for payment of Corporate Income Tax on a consolidated basis subsequently needs to set up new offices or premises, merge, relocate or close down offices or premises or to cease business activities of an office or premises, its main office or premises responsible for filing tax return for and payment of Corporate Income Tax on a consolidated basis shall report to the tax authorities at the location of the main office or premises in advance; where there is a need to change the main office or premises responsible for filing of tax return and payment of Corporate Income Tax on a consolidated basis, the formalities stipulated in the preceding paragraph shall be completed.
Article 128Monthly or quarterly prepayment of Corporate Income Tax shall be assessed by the tax authorities.
An enterprise which makes monthly or quarterly prepayment of Corporate Income Tax pursuant to the provisions of Article 54 of the Corporate Income Tax Law shall make prepayment according to the actual profit amount of the month or quarter; where there is difficulty in making prepayment according to the actual profit of the month or quarter, prepayments may be made according to the average monthly or quarterly amount of the taxable amount of income in the preceding tax year, or according to any other method approved by the tax authorities. The prepayment method, once confirmed, shall not be changed arbitrarily within the tax year.
Article 129Regardless of profit or loss in a tax year, an enterprise shall submit to the tax authorities the tax return form for prepayment of Corporate Income Tax, annual tax return for Corporate Income Tax, financial accounting reports and any other relevant materials stipulated by the tax authorities within the period stipulated in Article 54 of the Corporate Income Tax Law.
Article 130Where the income of an enterprise is not computed in Renminbi, the enterprise shall compute the taxable amount of income in Renminbi using the middle price of the Renminbi exchange rate on the last day of the month or the quarter when making prepayment of Corporate Income Tax. At the time of year-end final settlement, the enterprise is not required to re-compute monthly or quarterly prepaid tax amounts but shall use the middle price of Renminbi exchange rate on the last day of the tax year to convert unpaid corporate income tax in the tax year into Renminbi for computation of the taxable amount of income in Renminbi.
Upon checking and confirmation by the tax authorities, where the income stipulated in the preceding paragraph is under-computed or over-computed by the enterprise, the enterprise shall use the middle price of Renminbi exchange rate on the last day of the preceding month of the checking and confirmation of tax to be made good or tax refund to convert the under-computed or over-computed income into Renminbi for computation of taxable amount of income before computation of the tax amount to be made good or refunded.
CHAPTER 8 — SUPPLEMENTARY PROVISIONS
Article 131Enterprises approved and established before the promulgation of this Law referred to in the first paragraph of Article 57 of the Corporate Income Tax Law shall mean enterprises which have completed registration before the promulgation of the Corporate Income Tax Law.
Article 132The relevant provisions of the second and third paragraphs of Article 2 of the Corporate Income Tax Law shall apply by reference to enterprises established in the Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan.
Article 133These Regulations shall be effective 1 January 2008. The Implementation Regulations for the Corporate Income Tax Law of the People's Republic of China for Foreign Investment Enterprises and Foreign Enterprises promulgated by the State Council on 30 June 1991 and the Implementation Regulations for the Provisional Regulations of the People's Republic of China on corporate income tax promulgated by the Ministry of Finance on 4 February 1994 shall be repealed simultaneously.
中华人民共和国城镇土地使用税暂行条例(2013 修订) 发文机关: 国务院
发布日期: 2013.12.07
生效日期: 2013.12.07
时效性: 现行有效
中华人民共和国城镇土地使用税暂行条例
第一条为了合理利用城镇土地,调节土地级差收入,提高土地使用效益,加强土地管
理,制定本条例。
第二条在城市、县城、建制镇、工矿区范围内使用土地的单位和个人,为城镇土地使
用税(以下简称土地使用税)的纳税人,应当依照本条例的规定缴纳土地使用税。
前款所称单位,包括国有企业、集体企业、私营企业、股份制企业、外商投资企业、
外国企业以及其他企业和事业单位、社会团体、国家机关、军队以及其他单位;所称个人,
包括个体工商户以及其他个人。
第三条土地使用税以纳税人实际占用的土地面积为计税依据,依照规定税额计算征收。
前款土地占用面积的组织测量工作,由省、自治区、直辖市人民政府根据实际情况确
定。
第四条土地使用税每平方米年税额如下:
(一)大城市 1.5 元至 30 元;
(二)中等城市 1.2 元至 24 元;
(三)小城市 0.9 元至 18 元;
(四)县城、建制镇、工矿区 0.6 元至 12 元。
第五条省、自治区、直辖市人民政府,应当在本条例第四条规定的税额幅度内,根据
市政建设状况、经济繁荣程度等条件,确定所辖地区的适用税额幅度。
市、县人民政府应当根据实际情况,将本地区土地划分为若干等级,在省、自治区、
直辖市人民政府确定的税额幅度内,制定相应的适用税额标准,报省、自治区、直辖市人民
政府批准执行。
经省、自治区、直辖市人民政府批准,经济落后地区土地使用税的适用税额标准可以
适当降低,但降低额不得超过本条例第四条规定最低税额的 30%。经济发达地区土地使用
税的适用税额标准可以适当提高,但须报经财政部批准。
第六条下列土地免缴土地使用税:
(一)国家机关、人民团体、军队自用的土地;
(二)由国家财政部门拨付事业经费的单位自用的土地;
(三)宗教寺庙、公园、名胜古迹自用的土地;
(四)市政街道、广场、绿化地带等公共用地;
(五)直接用于农、林、牧、渔业的生产用地;
(六)经批准开山填海整治的土地和改造的废弃土地,从使用的月份起免缴土地使用
税 5 年至 10 年;
(七)由财政部另行规定免税的能源、交通、水利设施用地和其他用地。
第七条除本条例第六条规定外,纳税人缴纳土地使用税确有困难需要定期减免的,由
县以上地方税务机关批准。
第八条土地使用税按年计算、分期缴纳。缴纳期限由省、自治区、直辖市人民政府确
定。
第九条新征收的土地,依照下列规定缴纳土地使用税:
(一)征收的耕地,自批准征收之日起满 1 年时开始缴纳土地使用税;
(二)征收的非耕地,自批准征收次月起缴纳土地使用税。
第十条土地使用税由土地所在地的税务机关征收。土地管理机关应当向土地所在地的
税务机关提供土地使用权属资料。
第十一条土地使用税的征收管理,依照《中华人民共和国税收征收管理法》及本条例
的规定执行。
第十二条土地使用税收入纳入财政预算管理。
第十三条本条例的实施办法由省、自治区、直辖市人民政府制定。
第十四条本条例自 1988 年 11 月 1 日起施行,各地制定的土地使用费办法同时停止执
行。
Provisional Regulations of the People's Republic of China on Urban and Township Land Use Tax (Amended in 2013)
Promulgation Authorities: State Council
Promulgation Date: 2013.12.07
Effective Date: 2013.12.07
Validity Status: valid
Provisional Regulations of the People's Republic of China on Urban and Township Land Use Tax (Amended in 2013)
Article 1.These Regulations are formulated for the purposes of utilising urban and township land rationally, regulating differential land prices, raising land use efficiency and strengthening land administration.
Article 2.Organisations and individuals that use land within the region of a city, county town, town or industrial and mining area shall be taxpayers of the urban land use tax (hereinafter referred to as the "land use tax") and pay land use tax pursuant to the provisions of these Regulations.
Organisations mentioned in the preceding paragraph include State-owned enterprises, collective enterprises, private enterprises, enterprises with a shareholding structure, foreign investment enterprises, foreign enterprises and any other enterprises and institutions, social organisations, State departments, armed forces and other organisations; individuals mentioned in the preceding paragraph include individually-owned businesses and other individuals.
Article 3.Land use tax shall be calculated on the basis of the actual land area occupied by the taxpayer, and levied and collected pursuant to the stipulated taxable amounts.
The organisation that surveys the actual land area occupied by a taxpayer as mentioned in the preceding paragraph shall be determined by the People's Governments of provinces, autonomous regions and centrally-administered municipalities according to the actual circumstance.
Article 4.The taxable amount per square metre for land use tax shall be as follows:
(1) RMB1.5 to RMB30 for large cities;
(2) RMB1.2 to RMB24 for medium cities;
(3) RMB0.9 to RMB18 for small cities;
(4) RMB0.6 to RMB12 for county towns, towns and industrial and mining areas.
Article 5.The People's Governments of provinces, autonomous regions and centrally-administered municipalities shall, pursuant to conditions such as the level of municipal development, degree of economic prosperity, etc, determine the range of applicable tax amounts for their respective jurisdictions within the range of tax amounts stipulated in Article 4.
The People's Governments of municipalities and counties shall, pursuant to actual circumstances, divide the land in their respective jurisdictions into several grades and formulate a corresponding applicable tax amount standard, within the range of tax amounts determined by the People's Government of the respective province, autonomous region or centrally-administered municipality, and submit the standard to the People's Government of the respective province, autonomous region or centrally-administered municipalities for approval before implementation.
Upon approval by the People's Government of the province, autonomous region or centrally-administered municipality, the standard of applicable tax amount of land use tax in an economically undeveloped region may be reduced appropriately, provided the amount of reduction does not exceed 30% of the minimum taxable amount stipulated in Article 4. The applicable tax amount standard for land use tax in an economically developed region may be raised appropriately, provided the raise is approved by the Ministry of Finance.
Article 6.The following types of land shall be exempted from land use tax :
(1) land used by State authorities, civil organisations and armed forces;
(2) land used by organisations that receive allocated funding from the State finance authorities;
(3) land used for religious buildings, parks, scenic and historic attractions;
(4) municipal roads, squares, green zones and any other publicly used land;
(5) land used directly for agriculture, forestry, husbandry and fishery purposes;
(6) land from approved mountain clearings, sea reclamations and transformed abandoned land shall be exempted from land use tax for five to ten years from the month when the land is put to use; and
(7) land used for energy, communications, water resources facilities and any other form of land use that is granted tax exemption separately by the Ministry of Finance.
Article 7.With the exception of the provisions under Article 6, where a taxpayer has genuine difficulty paying land use tax and requires regular tax reductions or exemptions, the case shall be subject to the approval from the tax authorities at the county level or above.
Article 8.Land use tax shall be calculated annually and paid in installments. The payment period shall be determined by the People's Governments of provinces, autonomous regions and centrally-administered municipalities.
Article 9.Newly expropriated land shall be subject to land use tax pursuant to the following provisions:
(1) arable land which has been requisitioned shall be subject to land use tax with effect after one year from the date of approval of the requisition; and
(2) non-arable land which has been requisitioned shall be subject to land use tax with effect in the following month after the date of approval of the requisition.
Article 10.Land use tax shall be levied and collected by the tax authorities at the location of the land. Land administration authorities shall provide information on land use and ownership to the tax authorities at the location of the land.
Article 11.The administration of levying and collection of land use tax shall be executed pursuant to the provisions of the Law of the People's Republic of China on Administration of Tax Levying and Collection and these Regulations.
Article 12.The revenue from land use tax shall be included in the Budget for administration.
Article 13.The implementation measures for these Regulations shall be formulated by the People's Governments of the provinces, autonomous regions and centrally-administered municipalities.
Article 14.These Regulations shall be effective 1 November 1988 and the land use fee measures promulgated by all localities shall cease to be implemented simultaneously.
国家税务总局关于下放城镇土地使用税困难减免税审批权限有关事
项的公告 发文机关: 国家税务总局
发布日期: 2014.01.08
生效日期: 2014.01.01
时效性: 现行有效
文号: 国家税务总局公告 2014 年第 1 号
国家税务总局关于下放城镇土地使用税困难减免税审批权限有关事项的公告
国家税务总局公告 2014 年第 1 号
根据《国务院关于取消和下放一批行政审批项目的决定》(国发〔2013〕44 号)及
《国务院关于修改部分行政法规的决定》(国务院令第 645 号),决定把城镇土地使用税
困难减免税(以下简称困难减免税)审批权限下放至县以上地方税务机关。现将有关事项公
告如下:
一、各省、自治区、直辖市和计划单列市地方税务机关(以下简称省地方税务机关)
要根据纳税困难类型、减免税金额大小及本地区管理实际,按照减负提效、放管结合的原则,
合理确定省、市、县地方税务机关的审批权限,做到审批严格规范、纳税人办理方便。
二、困难减免税按年审批,纳税人申请困难减免税应在规定时限内向主管税务机关或
有权审批的税务机关提交书面申请并报送相关资料。纳税人报送的资料应真实、准确、齐全。
三、申请困难减免税的情形、办理流程、时限及其他事项由省地方税务机关确定。省
地方税务机关在确定申请困难减免税情形时要符合国家关于调整产业结构和促进土地节约
集约利用的要求。对因风、火、水、地震等造成的严重自然灾害或其他不可抗力因素遭受重
大损失、从事国家鼓励和扶持产业或社会公益事业发生严重亏损,缴纳城镇土地使用税确有
困难的,可给予定期减免税。对从事国家限制或不鼓励发展的产业不予减免税。
四、省地方税务机关要按照本公告的要求尽快修订并公布本地区困难减免税审批管理
办法,明确困难减免税的审批权限、申请困难减免税的情形、办理流程及时限等。同时,要
加强困难减免税审批的后续管理和监督,坚决杜绝违法违规审批。要建立健全审批管理和风
险防范制度。要加大检查力度,及时发现和解决问题,不断完善本地区困难减免税审批管理
办法。
五、负责困难减免税审批的地方税务机关要坚持服务与管理并重的原则,切实做好审
批工作。要加强宣传和解释,及时让纳税人知晓申请困难减免税的情形、受理机关、办理流
程、需报送的资料等。要优化困难减免税审批流程,简化审批手续,创新审批管理工作方式,
推进网上审批。同时,要加强困难减免税审批的事中事后管理,明确各部门、各岗位的职责
和权限,严格过错追究。要设立困难减免税审批台账,定期向上级地方税务机关报送困难减
免税批准情况。要加强对困难减免税对象的动态管理,对经批准减免税的纳税人进行跟踪评
估。对情形发生变化的,要重新进行审核;对骗取减免税的,应及时追缴税款并按规定予以
处罚。
六、本公告未涉及的事项,按照《国家税务总局关于印发〈税收减免管理办法(试行)〉
的通知》(国税发〔2005〕129 号)及有关规定执行。
本公告自 2014 年 1 月 1 日起施行。《国家税务总局关于下放城镇土地使用税困难减
免审批项目管理层级后有关问题的通知》(国税函〔2004〕940 号)同时废止。
特此公告。
国家税务总局
2014 年 1 月 8 日
Notice of State Administration of Taxation on Relevant Matters Regarding Delegating the Approval Right for Reduction and
Exemption of Urban and Town Land Use Tax Due to Difficulty
Promulgating authority: State Administration of Taxation
Promulgating Date: 2014.01.08
Effective Date: 2014.01.01
Validity Status: Effective
Document No.: State Administration of Taxation Notice [2004 ] No. 1
Notice of State Administration of Taxation on Relevant Matters Regarding Delegating the Approval Right for Reduction and
Exemption of Urban and Town Land Use Tax Due to Difficulty
State Administration of Taxation Notice [2004 ] No. 1
According to Decision of the State Council on Canceling Administrative Approval Requirements or Delegating Approval Power to Lower-level Authorities for a Batch of Items(Guofa(2013) No. 44) and Decision of the State Council on Amending Certain Administrative Regulations(State Council Decree No. 645), the approval authority for urban land use tax reduction and exemption due to difficulty shall be delegated to local taxation authority at or above the county level. It is hereby notified as below:
1. The local taxation authority of provincial, autonomous region, municipality directly under the central government and municipalities with independent planning status (hereinafter referred to as provincial local taxation authority) should determine the approval authority of provincial, city and county local taxation authority reasonably according to the type of difficulty, amount of tax reduction and exemption, the management of the area based on the principle of decreasing the burden and increasing the efficiency so as to facilitate the taxpayer.
2. The tax reduction and exemption due to difficulty should be approved annually. The taxpayer should apply for and submit the relevant materials in writing to competent taxation authority or the taxation authority with
approval authority. The materials submitted by the taxpayers should be real, accurate and complete.
3. The conditions, process, time and other matters about the tax reduction and exemption due to difficulty should be determined by provincial local taxation authorities. When determining the conditions of tax deduction and exemption, the provincial local taxation authorities shall satisfy the requirement on the adjustment of industrial structure and intensive land use of the state. For the enterprises which suffer great loss due to the natural disaster caused by wind, fire, water and earthquake or other force majeure, the enterprises suffering great loss which engage in the industry encouraged or supported by the state or public welfare, the tax reduction or exemption can be granted periodically if it is difficult for them to pay the urban land use tax. The tax reduction or exemption can’t be granted for the industries restrained or discouraged by the state.
4. Provincial local taxation authority should promulgate and publish the approval method on the tax reduction and exemption due to difficulty in its area, clarifying the approval authority of tax reduction and exemption due to difficulty, the conditions, process and time of the tax reduction and exemption due to difficulty. At the same time, strengthen the follow-up supervision and management of tax reduction and exemption due to difficulty and avoid the illegal approval. Establish and complete approval management and risks prevention system, increase the inspection, find and solve the problem timely and perfect the approval management of tax reduction and exemption duo to difficulty.
5. The local taxation authority responsible for the approval of tax reduction and exemption due to difficulty should insist the service and management. The taxation authority should strengthen the publicity and explanation so that the taxpayers can know the conditions, responsible authority, process and materials submitted of tax reduction and exemption due to difficulty, optimize the approval process of tax reduction and exemption due to difficulty, simplify the procedure, innovate the management method and promote the on-line approval. At the same, the taxation authority should strengthen the beforehand and afterwards of approval of tax reduction and exemption due to difficulty, explicit the duty and authority of the department and post and strict the responsibility. The taxation authority should set up the report of approval for tax reduction and exemption due to difficulty and report the approval situation for tax reduction and exemption due to difficulty to upper level taxation authority periodically, strengthen the dynamic management for the subject of the tax reduction and exemption due to difficulty and follow up the assessment for
the taxpayers obtained tax reduction and exemption due to difficulty. The taxation authority should examine again if the situations change and pursue the tax payment and punish accordingly for defrauding tax reduction and exemption.
6. The matters not covered by this notice shall be implemented according to Administrative Measures on Tax Reduction and Exemption (Trial Implementation) and relevant provisions.
This notice goes into effect since January 1, 2014. The Notice on Relevant Issues after Delegating the approval authority for urban land use tax reduction and exemption due to difficulty by State Administration of Taxation (Guoshuihan [2004] No. 940) shall be abolished.