SAIC Measures to Specify "Illegal Gains"

On November 28, 2008, the State Administration for Industry and Commerce ("SAIC") released the Measures for Recognition of Illegal Gains in Handling Administrative Penalty Cases by the AICs (the "Measures"), effective January 1, 2009. The Measures set forth the principles to recognize an "illegal gain" by SAIC and its local counterparts when dealing with administrative penalty cases. Under the Measures, "illegal gains" shall be calculated by subtracting the reasonably appropriate expenses directly used for business operation by the party, from the entire income derived from illegal production or sale of goods or provision of services by the party. Specifically, the "illegal gain" from (i) illegal production of goods shall be calculated by subtracting the purchase price of raw materials from the sales revenue of the goods illegally produced; (ii) illegal sale of goods shall be calculated by subtracting the purchase price of the goods illegally sold from the sales revenue derived from the illegal sale; and (iii) illegal provision of services shall be calculated by subtracting the purchase price of the goods used in the services from the entire income derived from such illegal provision of the services.


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