Laws of the People's Republic of China on Stamp Tax

1 KAIZEN CERTIFIED PUBLIC ACCOUNTANTS LIMITED. ROOM 2101-2103, FUTURA PLAZA, 111 HOW MING STREET. KWUN TONG, HONG KONG. TEL: +852 23411444. FAX: +852 23411414. EMAIL: Shenzhen Office, China Shanghai Office, China Beijing Office, China Singapore Office Taiwan Office Room 2508, Shenhua Comm. Room 1022, Yunsun Tower Room 402, Beijing Aerospace #05-04, The Office Chamber 10/F., No. 143 Keelung Bldg., 2018 Jiabin Road, 2025 Zhongshan Road West Building, 30 Haidian South Road 230 Jalan Besar, Road, Sec. 1, Taipei, Luohu District, Shenzhen Xuhui District, Shanghai Zhongguancun, Beijing Singapore 208906 Taiwan Tel: +86 755 8268 4480 Tel: +86 21 6439 4114 Tel : +86 10 6874 8420 Tel : +65 6295 2884 Tel: +886 2 2747 8353. Fax: +86 755 8268 4481 Fax: +86 21 6439 4414 Tel : +86 10 6874 8421 Fax: +65 6295 2997 Fax: +886 2 2747 8373.

2 17 August 2010. BY EMIAL. Dear Clients, RE The People's Republic of China on Stamp Tax In light of the inefficiency in the assessment and collection of Stamp duty by the local tax bureaus, the State Administration of Taxation has recently issued a notice to all the local tax bureaus aimed at strengthening the assessment and collection of Stamp duty. In accordance with the relevant laws and regulations of the People's Republic of China (PRC) in relation to the assessment and collection of Stamp duty, Stamp duty are assessed and charged on the following instruments or documents of title as transacted in the PRC: (1) Purchase and Sales contracts, the undertaking of processing, subcontracting of construction projects, leasing of properties, transportation of commodities, warehousing, loans and borrowings, property insurance, transfer of technologies, documents in the nature of a contract.

3 (2) Instruments or documents for transfer of property rights;. (3) Books of accounts;. (4) Certificates of rights and licences and permits In View of most of the local tax bureaus do not enforce Stamp duty related laws and regulations into the right standard, supervising control remains in limited spectrum and in weak strength, we would like to remind you that it is the taxpayer's duty to pay tax in accordance with the laws, non- compliance of which shall be confined penalty to pay. May we purpose you deliver all such stampable instruments/documents to us on a regular monthly or quarterly basis, then we could serve to arrange to have these instruments/documents stamped and/or Stamp duty filed/reported on your behalf. Pursuant to the reorganization of Stamp duty collectible by the local Tax Bureaus on both the signed effective contracts and the unsigned existent contracts, the scope of Stamp duty collections has been enlarged, in respect of which the Tax Authority has not yet announced clarified instructions, and therefore we can pay the Stamp duty in accordance to the contracts furnished to us voluntarily by your company.

4 In addition, although your company has not yet furnished the contracts, we in response to the previewing stringent tax investigation items by the Local Tax Bureaus shall then base on the figures recorded in the books of accounts for calculation and filing of stump duty payable. In view of such unascertained issues regarding the Stamp duty, we cannot pledge total accuracy in the calculation and filing of such Stamp duty, please be lenient to understand. However, we will review all stampable documents of your company from the very beginning and prepare a calculation of the Stamp duty payable for your confirmation. Should you have any questions as to the reporting of Stamp duty or to the amount of Stamp duty payable arrived at, please contact us soonest! Enclosures: 1.

5 Interim Regulations of the People's Republic of China on Stamp Tax 2. Detailed Rules for Implementation of Provisional Regulations of the PRC on Stamp Tax 3. Stamp Tax Schedule of Tax Items and Tax Rates The People's Republic of China on Stamp Tax Enclosures 1- Interim Regulations of the People's Republic of China on Stamp Tax (Adopted by the Ninth Executive Meeting of the State Council on June 24, 1988 and promulgated by Decree No. 11 of the State Council of the People's Republic of China on August 6, 1988, and become effective as of October 1, 1988). Article 1. All units and individuals who execute or receive, within the territory of the People's Republic of China , documents in the categories specified in these Regulations shall be taxpayers subject to Stamp tax (hereinafter referred to as "taxpayers"), and shall pay Stamp tax in accordance with the provisions of these Regulations.

6 Article 2. The following categories of documents shall be taxable documents: (1) contracts or documents in the nature of a contract with regard to: purchases and sales, the undertaking of processing, contracting for construction projects, property leasing, commodity transport, warehousing, loans, property insurance, technology;. (2) documents for transfer of property rights;. (3) business account books;. (4) certificates evidencing rights or licences; and (5) other documents that are taxable as determined by the Ministry of Finance. Article 3. According to the nature of the taxable document, taxpayers shall calculate the amount of tax due on the basis of a flat tax rate or a fixed amount per document. Determination of the specific tax rate or amount of tax shall be made with reference to the Schedule of Tax Items and Tax Rates accompanying these Regulations.

7 No Stamp tax shall be due where the amount of tax payable does not exceed one jiao. Where the amount of tax payable is one jiao or more, an odd amount not exceeding five fen shall not be counted; where the odd amount is five fen or more, the tax shall be calculated as one jiao. Article 4. The following documents shall be exempt from Stamp tax: (1) duplicates or copies of documents on which Stamp tax has already been paid;. (2) documents executed for the donation of property to the government, social welfare establishments or schools by the property owner;. (3) other documents which are exempt from Stamp tax with the approval of the Ministry of Finance. Article 5. Measures for the payment of Stamp tax shall be implemented whereby taxpayers shall, in accordance with the provisions, calculate the amount of tax payable and purchase and affix at one time the full corresponding amount of tax stamps (hereinafter referred to as "stamping").

8 In order to simplify the stamping procedures where the amount of tax to be paid is relatively large or where frequent stamping is necessary, taxpayers may apply to the tax authorities to use a tax payment account instead of stamping, or a periodic payment method. Article 6. Tax stamps shall be affixed to taxable documents; taxpayers shall cancel each Stamp along its border with a seal or a drawn line. Tax stamps that have already been affixed may not be reused. Article 7. Tax stamps shall be affixed to taxable documents at the time of execution or upon receipt. Kaizen Certified Public Accountants Limited 2. The People's Republic of China on Stamp Tax Article 8. Where the same document is executed by two or more parties and each party holds a copy, each party shall be responsible for affixing on its own copy the full amount of tax stamps due.

9 Article 9. Where a document on which tax stamps have already been affixed is amended, resulting in an increase in the value thereof, additional tax stamps shall be affixed on the document in accordance with the amount of such increase. Article 10. The tax authorities shall be responsible for the administration of the collection of Stamp tax. Article 11. The State Taxation Bureau shall supervise the printing of the tax stamps. The face value of tax stamps shall be denominated in Renminbi. Article 12. Units issuing or processing taxable documents shall be responsible for the supervision of taxpayers in respect of the payment of Stamp tax in accordance with the law. Article 13. Where taxpayers are found to have engaged in any of the following, the tax authorities shall impose penalties in light of the seriousness of the case: (1) in the case of a failure to affix tax stamps, or to affix an insufficient amount of tax stamps, on taxable documents, the tax authorities may, in addition to ordering taxpayers to make up the tax stamps, impose a fine equal to twenty times or less the amount of tax stamps due.

10 (2) in the case of a violation of the provisions of Paragraph 1 of Article 6 of these Regulations, the tax authorities may impose a fine equal to ten times or less the amount of the tax stamps that have not been cancelled by a seal or a drawn line; and (3) in the case of a violation of the provisions of Paragraph 2 of Article 6 of these Regulations, the tax authorities may impose a fine equal to thirty times or less the amount of the tax stamps that have been reused. In a case where tax stamps have been forged, the tax authorities shall submit the matter to the judicial authorities for investigation into criminal liability in accordance with the law. Article 14. The collection and administration of Stamp tax shall, in addition to the provisions of these Regulations, be administered in accordance with the pertinent provisions of the Interim Regulations of the People's Republic of China for Tax Administration.