1. THE SCOPE OF BUSINESS TAX
All units and individuals engaged in the provision of services as stated below, or the transfer of intangible assets or the sale of immovable properties within China shall be the taxpayer of business tax.

2. THERE ARE 9 CATEGORIES OF TAXABLE INCOME ITEMS:
The scope of business tax is mutually exclusive from Value Added Tax and so if a transaction is subject to business tax then it is not subject to Value Added Tax.
Business tax taxable items and tax rates table 50

Taxable items Scope of charge Tax rate
1. Transportation Transportation by land, water, air and pipeline, loading, unloading 3%
2. Construction Construction, installation, repair, decoration and other engineering work 3%
3. Finance and insurance 8% and from the year of 2001, 1% reduction each year to 5% from 2001 to 2003
4. Posts and telecommunications 3%
5. Cultural activities and sports 3%
6. Entertainment o Singing bars, dance halls, karaoke lounges, commercial music halls, musical tea houses, billiards, golf, bowling and amusement facilities 20%
7. Service Agency, hotel, catering restaurant, tourism,
warehousing, leasing, advertising and other services 5%
8. Transfer of intangible assets Transfer of land-use rights, patent rights, non-patented technologies, trade marks, copyrights and goodwill 5%
9. Sale of immovable properties Sale of buildings and other attachments to land 5%

2.1 Transportation
It includes the domestic and cross-boai1er transportation by sea, air, land, pipeline of gas, liquid or solid, loading and unloading of goods, guiding of ships or airplanes, parking and port charge.
2.2 Construction
It includes the construction of building, installation of equipment or machinery, repairing of building, decoration and other engineering work. For construction, repair and decoration work, the turnover includes the cost of raw materials and power. For installation work, the turnover includes the cost of machinery if it is included as part of the contract amount.
Subject to certain conditions, self-construction and self-used building is not subject to business tax
@A construction company contracted to build a house and it was responsible to supply the materials. When the construction completed, total amount of used construction materials and decoration materials cost RMB2 million. The construction company received the construction fee BMB650,000. The business tax for the construction company:
Business tax payable (2,000,000 + 650,000) x 3% RMB79,500.
2.3 Finance and insurance
Finance includes lending, financial leasing, foreign exchange and other financial services. The interest earned is subject to business tax. Insurance includes the service provided by overseas insurance company in PRC. A financial institute can deduct the interest expenses from the interest income for the foreign currency re-lending business to calculate the business tax.
@ A Bank, in 2000, receives deposits and pay interest RMB600,000 and earned interest RMB75O,000. At the same time, it raise RIvIB55 million from overseas on 5% interest rate and re-lending RMB3O million to some enterprise and earned income for RMB 2.5 million.
Business tax = 750,000 x 8% + (2,500,000-30,000,000 x 5%) x 8% = RMB 140,000.
2.4 Post and telecommunication
Post includes the delivery of physical message e.g. letter, express and package, and postal savings deposits and other postal services. Telecommunication includes the electronic transmission of information e.g. telegrams, faxes, telephone calls and the sales of goods related to such business.
@ A construction company installs cable from Guangzhou to Shenzhen and receives RMB8O million as income from the installation.
Business tax 80,000,000 x 3% RMB2,400,000.
2.5 Cultural activities and sports
Cultural activities include performance, broadcasting, exhibitions, training activities, seminar, lectures and meetings on culture, art, science and technology, lending service provided by libraries. Sports includes organization and operation of all kinds of sports competition and activities
2.6 Entertainment
It includes the provision of place and services for entertainment. Its turnover includes entrance fee of nightclubs, dancing place, karaoke, music lounges, snooker clubs, golf courses, bowling place and its related food and beverage charge.
@A restaurant with dinning place and ballroom provides drinks and entertainment for customers. The restaurant have the following income in a month: income from dinning placeRMBl .5 million, income from ballroom tickets RMB25O,000, income from drinks R.MB9O,000, from singings in ballroom RMBI 50.000. Calculate the business tax for the month (the business tax rate for entertainment in that area is 20%)
(1) business tax for dinning = 1,500,000 x 5% = RMB75,000
(2) business tax for entertainment (250,000 + 90,000 + 150,000) x 20% RMB98,000
Business tax for the month = 75,000 + 98,000 RMB 173,000
2.7 Services
It includes agency, hotel, catering, tourism, warehousing, leasing, advertising and other services such as laundry, designing, surveying, photography, haircutting, chemical analysis, measuring and accounting, legal consultancy, etc.
2.8 Assignment of intangible assets
It is defined as the assignment of the ownership or use right of intangible assets such as land use rights, patent, trademark, technology, copyright and brand name. However if the transfer is used as a capital contribution to an enterprise and the investor enjoys the profit sharing and bears the risk of investment, the transfer is not subject to business tax. Also according to Caishuizi [2002] 191, the investor is exempt from business tax when it disposes the investment in which it has previously contributed the intangible assets.
2.9 Sales of immovable property
It is defined as the sales for consideration of the ownership of immovable property. Immovable property includes buildings, construction and other attachment to the land. However if the transfer is used as a capital contribution to an enterprise and the investor enjoys the profit sharing and bears the risk of investment, the transfer is not subject to business tax. Also according to Caishuizi [2002]191. the investor is exempt from business tax when it disposes the investment in which it has previously contributed the immovable property.
Non-individual donation of immovable property without consideration is deemed to be the sales of immovable property and subject to business tax. However the donation without consideration by individual is not subject to business tax.
(A property developer sold properties for RMB 10 million, income from transfer of land use rights RMB 1 million and rental RMB25O,000, calculate the business tax for the month.
(1) Sales of immovable property 10,000,000.
(2) The business tax 10,000,000 x 5% = RMB500,000
(3) Business tax for rental = 250,000 x 5% RMB 12,500
(4) Business tax for the income from transfer land use rights 1,000,000 x 5%
RMB5O,000
Total amount of business tax for the month 500,000 + 12,500 + 50,000 =
RMB562,500