In accordance with Accounting Law of China provision 12, RMB should be the bookkeeping base currency. If there are other currencies dominate in business operation, one of them can be the base currency for bookkeeping. But it shall exchange into RMB when compiling Accounting Financial Report. However, Chinese Tax Law and Accounting Law have different provisions on Foreign Exchange Conversion, as well as the exchange rate for different tax types. The following are the provisions on Foreign Exchange Conversion of several main types of taxes in China:

1. Value-added Tax, Consumption Tax, Resource Tax, Land Appreciation Tax
   
   Enterprises shall convert any foreign currency into RMB if have the revenues subject to above tax categories. The exchange rate shall be the PBC’s exchange rate on the day of the sales or on the first day of the month. Enterprises shall determine in advance which exchange rate shall be adopted. Once decided, it shall not be changed within 12 months.
   
   
2. Enterprise Income Tax
   
   

   If enterprise income is calculated in currencies other than RMB, it shall use RMB equivalent amount to calculate EIT. The exchange rate can be the PBC’s rate on the last day of the reporting month or quarter. When in annual final settlement, it is no need to recalculate the enterprise income which has been paid in advanced on a monthly, quarterly basis. For the portion of revenue that not been charged or overcharged with EIT, it shall use PBC’s exchange rate to calculate the RMB equivalent amount and corresponding EIT. After examining and confirming by tax authorities, it shall use the PBC’s exchange rate to calculate the taxable enterprise income of the undercount or overcount revenue. In which, the exchange rate shall be the PBC’s rate on the last day of the preceded month. Then calculate the amount of tax payable or refundable in the proceed period.

   
   
3. Individual Income Tax
   
   Individual Income in foreign currencies shall be exchanged into RMB to compute taxable income. The rate shall use PBC’s exchange rate on the last day of the month before declaration or payment. When in yearly final settlement, it is no need to recalculate the individual income in other currencies which has been paid in advanced on a monthly, quarterly basis. For the portion of income that not been charge or overcharged with IIT, it shall use PBC’s exchange rate to calculate the taxable income.
   
   
4. Stamp Duty, Deed Tax
   
   Stamp Duty and Deed Tax shall be exchanged according to PBC’s exchange rate on the date of occurrence of tax payment (withhold) obligation.
   
   
5. Property Tax
   
   Property Tax shall be exchange according to PBC’s exchange rate on the last day of the month before payment.
   
   
6. Vehicle purchase Tax
   
   Automobile Acquisition Tax shall be exchanged according to the central parity of RMB exchange rate on the day of tax declaration.
   
   
7. Customs Import and Export Duties
   
   If the prices and expenditures of import and export goods are in foreign currencies, the customs will use the tariff exchange rate on applicable date to calculate RMB equivalent amount. The tariff exchange rate used by the customs is the rate posted by the People’s Bank of China on the third Wednesday of previous month (it would be deferred to the fourth Wednesday for statutory holiday).
   

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