On November 10, 2008, the China State Council issued the amended Provisional Regulations of the PRC on Business Tax ("BT Regulations"). On December 15, 2008, the Ministry of Finance and the State Administration of Taxation ("SAT") issued the Implementation Rules of the Provisional Regulations of the PRC on Business Tax ("BT Rules"). Both the BT Regulations and the BT Rules will come into effect on January 1, 2009. The BT Rules reinterpret the scope of taxable services and impose business tax on foreign services.

According to these new regulations business tax is imposed on the provision of services and the transfer of intangibles and immovable properties within the territory of China. The business tax rate for most services is five percent of gross service fees. Previously, the interpretation was that the service provider would be liable for business tax only if the taxable services were performed within China.

According to this new regulations, if services are provided to an enterprise, a non business organization, or an individual in China, the service provider will be liable for business tax on or after January 1, 2009, regardless of where the services are performed. Accordingly, foreign services to a Chinese company would be subject to China business tax.