9 Resource Tax

TAXPAYERS

TAXABLE ITEMS AND TAX PER UNIT

COMPUTATION METHODS

TAX REDUCTIONS AND EXEMPTIONS

TIME LIMIT AND PLACE FOR TAX PAYMENT

Aimed at protecting State-owned natural resources, and improving the reasonable development and utilization of such resources, Resource Tax is levied in China on specified natural resources in such a manner as to adjust for income differentials arising from grade differences in various natural resources. The Provisional Regulations of the People's Republic of China on Resource Tax currently in force were promulgated by the State Council on December 25, 1993, and came into effect from January 1, 1994.

Resource Tax is administered by the State Administration of Taxation (SAT) and the local tax bureaus. The revenue collected is shared between the Central Government and the local governments. In 2003, revenue from Resource Tax amounted to 8.31 billion yuan, accounting for 0.4% of the country's total tax revenue.

TAXPAYERS

Entities and Activities Subject to Tax

Where the following entities engage in the exploitation of taxable mineral products or the production of salt within the territory of China, they shall be subject to Resource Tax.

• State-owned enterprises (SOEs), collective enterprises, private enterprises, joint-equity enterprises, enterprises with foreign investment, foreign enterprises, and other enterprises.
• Administrative units, institutions, military units, social organizations, and other units.
• Individual business operators and other individuals.

Withholding Agents

Independent mines, joint enterprises, and other units that purchase untaxed mineral products shall be the withholding agents for Resource Tax.

Special Instances

• Sino-foreign joint ventures: Under the present regulations, mining district use fees, rather than Resource Tax, are levied on oil and natural gas extracted by Sino-foreign joint ventures.

Revenue Breakdown

At present, tax revenue comes mainly from SOEs, collectively-owned enterprises, private enterprises, and joint-equity enterprises engaged in the exploitation of crude oil, iron ores, and coal, and in the production of salt.

TAXABLE ITEMS AND TAX PER UNIT

Items Subject to Tax

Currently, there are seven main categories of taxable items.

Crude Oil

The exploitation of natural crude oil is subject to tax. Artificial oil is not subject to tax.

Natural Gas

Natural gas that is specially exploited or that is exploited together with crude oil is subject to tax. Natural gas from coal mining is not taxed provisionally.

Coal

Raw coal is subject to tax. Coal washing, coal dressing, and other coal products are not subject to tax.

Other Non-Metal Ores

Examples include gems, diamonds of gem grade, jade stones, bentonite, graphite, quartz sand, fluorite, barite, witherite, vermiculite, feldspar, zeolite, talc, dolomite, wollastonite, attapulgite clay, kaolinite, refractory clay, mica, marble, granite, limestone, magnesite, natural alkali, gypsum, sillimanite, diamonds for industry use, asbestos, iron sulfate, natural sulfur, and iron phosphorus.

Ferrous Metal Ores

Iron ores, manganese ores, and chromium ores fall into this category.

Non-Ferrous Metal Ores

Examples include copper ores, lead and zinc ores, bauxite ores, tungsten ores, tin ores, antimony ores, molybdenum ores, nickel ores, and gold ores.

Salt

This category can be divided into two subcategories.

• Solid salt:This includes raw sea salt, raw lake salt, and shaft salt.
• Liquid salt (brine).

Tax per Unit

Computation is quantity-based and tax payable is calculated by applying the relevant tax per unit. For details, see Table 9.1.

Determination of Tax Amounts

The specific tax amount per unit applicable to the taxpayers shall be determined, within a prescribed range, by the Ministry of Finance in consultation with the relevant departments of the State Council, after considering the state of the resources from which the taxable products are exploited or produced by the taxpayers.

The tax amounts relating to various resources shall be adjusted from time to time by the Ministry of Finance in accordance with the state of the resources in question and the exploitation conditions. For details, see Table 9.2.

Any adjustments to the taxable items or tax amount must be approved by the State Council.

Other Resources

Other Non-Metal/Non-Ferrous Crude Ores

For other non-metal crude ores and non-ferrous crude ores that are not covered in the tables above, the People's Government in the provinces where they are located shall determine whether Resource Tax shall be levied or deferred.

For example, Yunnan has started to levy the tax on underground hot water and mineral water, Sichuan has imposed it on mercury mines and rare earth mines, and Zhejiang has imposed it on construction stones.

Grading and Tax Amounts

Taxable mineral products are graded in accordance with the table listing Mineral Resource Grades of Some Major Products published by the Ministry of Finance.

For those products not listed in this table, the tax amount per unit shall be assessed by the People's Government at the provincial level, after referring to this table as well as the tax amounts per unit applied to nearby mining districts, as listed in Table 9.2. Variations within a range of 30% shall be permitted.

COMPUTATION METHODS

General Framework

Tax payable shall be computed based on the assessable volume of the taxable products and the prescribed applicable tax amount per unit.

Where taxpayers exploit or produce taxable products that are subject to different taxable items, they should compute the tax payable separately for the various items. If they fail to do so, or are unable to provide precisely the assessable volumes for the different items, the tax department shall apply the highest prescribed tax amount per unit.

Assessable Volume

The assessable volume of the taxable products shall be determined based on the following rules:

• Products for sale: Where taxpayers exploit or produce taxable products for sale, the sales value shall be the assessable volume.
• Products for self-use: Where taxpayers exploit or produce taxable products for self-use, the volume allocated for self-use shall be the assessable volume.

Where taxpayers are unable to provide precisely the sales value or used-up value of the taxable products, the assessable volume shall be computed in one of two ways.

• Based on the value of producing the items.
• Based on the conversion ratio specified by the relevant tax department.

Computing Tax Payable

The basic formula for computing tax payable is provided below.

Tax payable = Assessable volume of taxable product × Applicable tax amount per unit

Example

A coal mine has sold 2,000,000 tons of coal for the month. The applicable tax amount per unit is 1 yuan per ton.

Tax payable = 2,000,000 tons × 1 yuan/ton = 2,000,000 yuan

Example

The owners of a natural gas well sold 30 million m³ of gas this month. The statutory tax amount per unit is 4 yuan per 1,000 m³.

Tax payable = 30 million m³ × (4 yuan per 1,000 m³) = 120,000 yuan

TAX REDUCTIONS AND EXEMPTIONS

Taxpayers should account separately for the assessable volume of items subject to reductions or exemptions. Where they fail to do so, or are unable to precisely provide the assessable volume of the items, the tax department shall not accept any application for reduction or exemption.

Reductions or exemptions may be granted for the following items.

• Crude oil: Where it is used to heat or repair wells in the course of exploiting crude oil, it may be exempt from tax.
• Iron ores: Tax on such ores payable by independent metallurgical mines may be reduced by 60%.
• Non-ferrous metal ores: Tax may be reduced by 30%.

Reductions or exemptions may also be granted under the following circumstances:

• Losses from disasters/accidents: Where taxpayers sustain huge losses arising from accidents or natural disasters in the course of exploiting or producing taxable products, appropriate reductions or exemptions may be granted at the discretion of the People's Governments at the provincial level.

  The State Council may stipulate other items for reduction or exemption.

TIME LIMIT AND PLACE FOR TAX PAYMENT

When Liability Arises

Products for Sale

When tax liability arises it varies depending on the method of settlement involved in the sales of the products, and may be classified into three broad categories.

• Installment payments: Where settlement is made in installments upon receipt of the products, liability arises on the date agreed upon under the contracts for collection of payment.
• Advance payments: Where settlement is made in advance, liability arises on the date that the products are delivered.
• Other methods: Where settlement is made through other methods, liability arises on the date that the sales sum is received, or on the date that documented evidence of the right to collect the sales sum is obtained.

Products Self-Produced for Self-Use

For products that are self-produced by the taxpayer for their own use, liability arises on the date that the products are transferred for use.

Withholding Agents

For withholding agents, liability to withhold the tax arises on the date that the first sales sum is paid or on the date that the first receipt for the sum payable is issued.

Time Limits for Payment

Assessable Period

The assessable period shall be determined by the relevant tax department after taking into account the actual circumstances. It may be 1 day, 3 days, 5 days, 10 days, 15 days, or 1 month.

Where taxpayers are unable to compute the tax payable within prescribed time limits, the tax may be assessed based on the sales volume at each instance or on the quantity of the products allocated for self-use.

Settlement Deadlines

Taxpayers that adopt 1 month as their assessable period shall report and pay tax within 10 days of the period-end.

Taxpayers with an assessable period of 1 day, 3 days, 5 days, 10 days, or 15 days shall be prepay the tax within 5 days of the period-end, and settle the tax for the month within the first 10 days of the following month.

Withholding Agents

Deadlines for withholding agents to hand over the tax withheld shall be determined with reference to the rules described earlier.

Places for Payment

Tax payable shall be paid to the relevant local tax offices in the locales where the taxable products are exploited or produced.

Exploitation Within One Area

Where taxpayers exploit or produce taxable products within the boundaries of their own provinces/autonomous regions/municipalities directly under the State Council, any changes in their tax payment locations must be approved by the local tax bureaus at the provincial level in their locations.

Cross-Area Exploitation

Where units exploit taxable products across provinces/autonomous regions/municipalities directly under the State Council, and where the subsidiary producing unit and the accounting unit are not located within the same province/autonomous region/municipality directly under the State Council, tax should be paid to the tax offices in the locales where the exploitation takes place.

Tax shall be computed based on the actual sales volume (or quantity allocated for self-use) generated from the exploitation, and on the applicable tax amount per unit. It shall be paid with a transfer of monies by the units that carry out independent accounting and that bear self-responsibility for gains/losses.

Withholding Agents

Tax withheld by the withholding agents should be paid to the relevant local tax offices in the locales where the purchase is made.