Fixed Assets Investment Tax
16 Fixed Assets Investment Tax
This tax (called Fixed Assets Investment Orientation Regulation Tax in full, or FAIORT) is levied on fixed-asset investments for the purpose of implementing State industrial policy, controlling the scale of the investments, guiding the investment orientation, adjusting the investment structure, and focusing on key construction. The Provisional Regulations of the People's Republic of China on FAIORT were promulgated on April 16, 1991 by the State Council, and came into effect in 1991.
In order to encourage investment, expand domestic demand, and facilitate economic development, the State Council has suspended the levy of this tax since 2000.
Entities Subject to Tax
Any of the following entities, excluding enterprises with foreign investment, foreign enterprises, and foreigners, that invest funds into fixed assets within the territory of the People's Republic of China, may be subject to the tax.
- State-owned enterprises (SOEs), collectively-owned enterprises, private enterprises, joint-equity enterprises, and other enterprises.
- Administrative units, non-profit institutions, military units, social organizations, and other units.
- Individual household businesses and individuals.
Fixed-asset investments into the following projects shall be treated as taxable items, and the projects shall be treated as taxable projects:
- Infrastructure construction projects.
- Renewal or transformation projects.
The tax rates are formulated in accordance with the State industrial policy and based on the economic scale of the investments.
Five rates are used: 0%, 5%, 10%, 15%, and 30%. The applicable rate depends on the by the investment into the project per unit.
Tax payable is based on the total investment actually put into the fixed assets of the taxable project and on the applicable tax rate.
In general, the following formula should be used to calculate tax payable:
Tax payable = Amount of investment in the completed part of the project × Applicable tax rate
Where the project involves construction, the following formula should be used:
Tax payable = Amount of investment in construction project × Applicable tax rate
Time Limits for Payment
Tax is prepaid based on the annual program of the unit project of the fixed-asset investments.
At the year-end, tax shall be settled, and the excess rebated or the deficiency made up, based on the actual proportion of the taxable project invested into that has been completed.
At the completion of the project, tax shall be finalized based on the taxable project and on the actual proportion of the project completed by the relevant unit.