The Ministry of Finance and the State Administration of Taxation recently issued an announcement stating that the “Resource Tax Law of the People’s Republic of China” has been adopted by the Twelfth Meeting of the Standing Committee of the 13th National People’s Congress on August 26, 2019, since September 1, 2020. It will come into effect today. According to the announcement, the resource tax preferential policies that will continue to be implemented after the implementation of the Resource Tax Law include:

First, the sand, stone and other materials collected and used by the Qinghai Tibet Railway Company and its affiliated units during the operation period shall be exempted from resource tax. The specific operation shall be carried out in accordance with Article 3 of the notice of the Ministry of Finance and the State Administration of Taxation on tax and other policy issues during the operation of Qinghai Tibet Railway Company (CS [2007] No. 11).

Second, the shale gas resource tax will be reduced by 30% from April 1, 2018 to March 31, 2021. The specific operation shall be carried out in accordance with the notice of the Ministry of Finance and the State Administration of Taxation on reducing resource tax on shale gas (CS [2018] No. 26).

Third, from January 1, 2019 to December 31, 2021, small-scale VAT taxpayers can reduce resource tax within 50%. The specific operation shall be carried out in accordance with the relevant provisions of the notice of the Ministry of Finance and the State Administration of Taxation on the implementation of the inclusive tax relief policy for small and micro enterprises (CS [2019] No. 13).

Fourth, from December 1, 2014 to August 31, 2023, the resource tax on the coal replaced by filling mining will be reduced by 50%.

In addition, in order to implement the resource tax law of the people’s Republic of China, the Ministry of Finance and the State Administration of Taxation also issued an announcement on the implementation caliber of resource tax related issues, involving issues such as the determination of sales volume and sales volume of resource tax taxable products, and the implementation of reduction and exemption policies.

According to the announcement, the sales amount of resource tax products shall be determined according to the total price collected by the taxpayer from the buyer, excluding the value-added tax. The relevant freight and miscellaneous expenses included in the sales volume shall be allowed to be deducted from the sales volume if the value-added tax invoice or other legal and valid evidences are obtained. The related transportation and miscellaneous expenses refer to the transportation expenses, construction funds, loading and unloading, warehousing and port miscellaneous expenses of taxable products from the pit mouth or washing (processing) place to the station, wharf or the place designated by the buyer.

The sales volume of taxable products includes the actual sales volume of the taxable products mined or produced by the taxpayer and the sales volume of the taxable products used for resource tax payment.

According to the announcement, taxpayers who exploit or produce taxable products with different tax rates under the same tax item shall separately calculate the sales volume or sales volume of taxable products with different tax rates; if the sales volume or sales volume of taxable products with different tax rates are not separately calculated or cannot be accurately provided, the higher tax rate shall be applied.

The announcement clearly states that if the taxpayer directly sells the self mined raw ore (ore that has not been beneficiated or processed after mining) or uses it for the situation that the resource tax should be paid, the resource tax shall be calculated and levied according to the raw ore. If the self mining raw ore washing and processing is sold as mineral processing products, or the mineral processing products are self used in the situation where the resource tax should be paid, the resource tax shall be calculated and levied according to the mineral processing products, and the resource tax shall not be paid in the process of transferring the raw ore. For the formed sand and stone particles which can not be distinguished from the primary rocks and minerals, the resource tax shall be levied according to the sand and stone tax items.

According to the announcement, taxpayers who exploit or produce the same taxable products, some of which enjoy tax reduction or exemption policies, and some of which do not enjoy tax reduction or exemption policies, shall calculate and determine the sales volume or sales volume of tax-free and tax reduced items according to the production proportion of tax-free and tax reduced items. Where a taxpayer exploits or produces the same taxable product in compliance with two or more preferential policies for resource tax reduction, he can only choose one of them, unless otherwise specified.

The announcement on the implementation scope of resource tax shall come into effect on September 1, 2020. Notice of the Ministry of Finance and the State Administration of Taxation on the implementation of coal resource tax reform (CS [2014] No. 72), notice of the Ministry of Finance and the State Administration of Taxation on the adjustment of policies related to crude oil and natural gas resource tax (CS [2014] No. 73), and notice of the Ministry of Finance and the State Administration of Taxation on the implementation of rare earth tungsten The notice on the reform of ad valorem collection of molybdenum resource tax (CS [2015] No. 52), the notice of the Ministry of Finance and the State Administration of Taxation on comprehensively promoting the reform of resource tax (CS [2016] No. 53) and the notice of the Ministry of Finance and the State Administration of Taxation on specific policy issues of resource tax reform (CS [2016] No. 54) shall be repealed at the same time.