2012 Annual Report - ZTE

ZTE CORPORATIONNotes to Financial Statements (continued)(Prepared in accordance with PRC ASBEs)(All amounts in RMB’000 unless otherwise stated)(English translation for reference only)IIITAXATION1. Principal tax items and tax ratesValue-added tax — Payable on income generated from domestic sales of products andequipment repair services at a tax rate of 17%; Output tax at a tax rateof 6% is payable on sales service income generated from amended ornew additional scope of business deducting the current balance of taxcredit available for offsetting.Business tax — In accordance with relevant PRC tax regulations, business tax waspayable by the Group at tax rates of 3% and 5%, respectively, on itssales income and service income which were subject to business tax.City maintenance andconstruction tax— In accordance with relevant PRC tax regulations and local regulations,city maintenance and construction tax was payable according to ratesstipulated by the State based on individual situations of the branchesand subsidiaries of the Group.Education surcharge — In accordance with relevant PRC tax regulations and local regulations,education surcharge was payable according to rates stipulated by theState based on individual situations of the branches and subsidiariesof the Group.Individual income tax — In accordance with relevant PRC tax regulations, the Group withheldincome tax from its salary payments to employees based on progressivetax rates.Overseas tax — Overseas taxes were payable in accordance with tax laws of variouscountries and regions.Enterprise income tax — In accordance with the Law on Enterprise Income Tax promulgated on1 January 2008, enterprise income tax was payable by the Group onits taxable income2. Tax concession and approval documentsThe Company is subject to an enterprise income tax rate of 15% for the years from 2011 to 2013 asa national-grade hi-tech enterprise incorporated in Shenzhen. Income tax rates for certain domesticsubsidiaries of the Group are disclosed as follows:Xi’an Zhongxing New Software Company Limited, recognized as a software enterprise in December2009, has been entitled to enterprise income tax exemption in the first and second profitable yearsand a 50% reduction in enterprise income tax from the third to the fifth years pursuant to Cai Shui[2008] No. 1. The current year is its fourth profitable year and a 50% reduction in enterprise incometax rate of 25% is applicable.Nanjing Zhongxingxin Software Company Limited, recognized as a software enterprise in December2009, has been entitled to enterprise income tax exemption in the first and second profitable yearsand a 50% reduction in enterprise income tax from the third to the fifth years pursuant to Cai Shui[2008] No. 1. The current year is its third profitable year and a 50% reduction in enterprise incometax rate of 25% is applicable.194