Background and Objectives

In order to fully implement the spirit of the 20th National Congress of the Communist Party of China, the second and third plenary sessions of the 20th Central Committee, as well as the relevant provisions of the Resource Tax Law of the People's Republic of China and the Water Law of the People's Republic of China, strengthen the management and protection of water resources, and promote the conservation - intensive and safe utilization of water resources, the Implementation Measures for the Pilot Reform of Water Resources Tax are specially formulated. With the approval of the State Council, they are printed and distributed, and all regions are required to conscientiously implement them.

Main Contents

 1. Taxpayers: Units and individuals that directly extract groundwater or surface water within the territory of China shall pay water resources tax and apply for a water - taking license in accordance with the provisions of these measures.

 2. Tax Preferences: Five situations including water extraction for agricultural production within the specified limit are exempt from water resources tax; local governments have the right to reduce or exempt water resources tax for water extraction for agricultural production exceeding the specified limit and water extraction for rural centralized drinking water projects; relevant taxpayers whose water - use efficiency reaches the advanced value of the national water - use quota can have their water resources tax reduced.

 3. Revenue Attribution: All revenue from water resources tax goes to local governments, thereby appropriately increasing local independent financial resources.

 4. Tax Collection And Administration: Improve the cooperation mechanism for tax collection between tax authorities and water administrative departments, strengthen the supervision of taxpayers' water - taking metering facilities (instruments), and standardize and strengthen tax collection and administration.

Policy Significance

 1. Green Tax System: The full - scale implementation of the pilot reform of replacing water resource fees with taxes is an important achievement in deepening the fiscal and tax system reform and improving China's green tax system. It can support the green transformation of the economy and society and contribute to the construction of a beautiful China.

 2. Regional Differences: Fully consider the differences in water resource conditions and economic development levels in different regions, reasonably set the minimum average tax amount levels in different regions, and authorize local governments to determine the specific applicable tax amount of water resources tax in their respective regions according to regulations.

 3. Mobilizing Local Enthusiasm: All revenue from water resources tax is reserved for local governments. The reform can increase local independent financial resources, expand tax sources, and appropriately expand local tax management authority, so as to better bring into play the enthusiasm of local governments. This document indicates that China has taken a crucial step in water resource management. Through tax means, it promotes the rational utilization and protection of water resources, and also appropriately delegates local tax management authority to achieve better resource allocation and environmental governance effects.

Summary

The implementation measures for the pilot reform of water resources tax are a crucial initiative in the field of water resources management in China. It makes efforts in multiple aspects. It clarifies the scope of taxpayers, enabling units and individuals that extract groundwater or surface water to fulfill their tax - paying obligations according to the law. Through various tax preferential policies, it encourages rational water use and takes into account special water - use requirements. The revenue of water resources tax is assigned to local governments to strengthen local financial resources. The tax collection and management mechanism is improved to ensure the smooth implementation of tax work. From the perspective of policy significance, this reform is an important part of deepening the reform of the fiscal and tax system and improving the green tax system. It fully considers regional differences and can also motivate local initiatives. It provides strong support for the scientific management, rational utilization, and ecological protection of water resources. It is a powerful guarantee for the sustainable development of the economy and society and the construction of a beautiful China, and has a far - reaching impact on resource management and environmental governance in China.

At PHC Advisory, we can offer you full support on matters regarding doing business in China, or any other issues your business may face. If you would like to know more about policies relevant to your business in Italy or Asia, please contact us at info@phcadvisory.com.  

PHC Advisory is a company of  DP Group: an international professional services conglomerate of companies with approximately 100 experienced professionals worldwide. We offer comprehensive services in tax, accounting, and financial consulting, including financial supervision, financial audit, internal audit, internal control over financial reporting, and support for audited financial statements and annual audits, ensuring clients' financial transparency and compliance. 

Would you like to learn more about the business environment in China? Click the link and download our Practical Guides on Amazon! 

The content of this article is provided for informational purposes only, financial advice must be tailored to the specific circumstances on a case-by-case basis, and the contents of this article do not legally bind PHC Advisory with the reader in any way. 

If you want to know more about doing business in China, please have a look at our previous articles:  

•     Vietnam's Draft CIT Law: Key Changes for Businesses-NEWS-PHC ADVISORY

•     PRC Annual Compliance Activities for Companies-NEWS-PHC ADVISORY