(“CIRCULAR”)(财政部印 发《关于小微企业免征增值税和营业税的会计处理规定》的通知), ISSUED BY THE MOF

In our newsletter of August 2013 we referred to the temporary exemption for value added tax (“VAT”) and business tax (“BT”) payers with monthly sales volume not exceeding RMB 20,000 (“small and micro enterprises”).

Now the MOF clarifies the accounting treatment of the VAT and BT for these small and micro enterprises: for VAT payers, the VAT payable shall be calculated according to the standard rules and transferred to non-operating income, while for BT payers the tax is regarded inexistent and not even recorded in the accounts.

Date of issue: December 24, 2013. Effective date: December 24, 2013.