• About
  • Archive
  • Contact
  • Home 1
  • Submit a Story
  • Submit a Story
  • USCBC Podcasts
China Business Review
  • Operations
    Multinational Supply Chains in a Post-Pandemic China

    Multinational Supply Chains in a Post-Pandemic China

    Managing Risk in the “New Era”

    Managing Risk in the “New Era”

    Design Patents vs. Trade Dress: Protecting IP in China

    Design Patents vs. Trade Dress: Protecting IP in China

    As China Emerges from COVID-19, US Companies Invest to Compete

    As China Emerges from COVID-19, US Companies Invest to Compete

    Inside the Mad Rush for Masks – Anatomy of a 10 Million Mask Order

    Inside the Mad Rush for Masks – Anatomy of a 10 Million Mask Order

    Addressing Risk in the Era of US-China “Great Power” Competition

    Addressing Risk in the Era of US-China “Great Power” Competition

  • Politics
    Hong Kong’s National Security Law, Five Months In

    Hong Kong’s National Security Law, Five Months In

    China Implements its Long-Awaited Unreliable Entities List Mechanism

    China Implements its Long-Awaited Unreliable Entities List Mechanism

    Competing WTO Reform Agendas and the Contest for the Next Director-General

    Competing WTO Reform Agendas and the Contest for the Next Director-General

    China Eyes Further Northeast Asian Economic Integration in RCEP

    China Eyes Further Northeast Asian Economic Integration in RCEP

    COVID-19 Could Doom or Deliver US-China Commercial Relations

    COVID-19 Could Doom or Deliver US-China Commercial Relations

    A Game of Chicken

    A Game of Chicken

  • Tech
    Can China’s Beleaguered Gaming Industry Overcome the New Wave of Restrictions?

    Can China’s Beleaguered Gaming Industry Overcome the New Wave of Restrictions?

    Semiconductor Self-Sufficiency: MIIT’s Ambitions for 2021 and Beyond

    Semiconductor Self-Sufficiency: MIIT’s Ambitions for 2021 and Beyond

    The Growing Intersection of Digital Health and Data Processing in China

    The Growing Intersection of Digital Health and Data Processing in China

    Export Controls on Emerging and Foundational Technologies: A Null Set?

    Export Controls on Emerging and Foundational Technologies: A Null Set?

    How Companies Are Reacting to China’s New Data Security Scheme

    How Companies Are Reacting to China’s New Data Security Scheme

    China’s Participation in International Standards Setting: Benefits and Concerns for US Industry

    China’s Participation in International Standards Setting: Benefits and Concerns for US Industry

    Trending Tags

    • Intellectual Property
    • innovation
    • cybersecurity
    • ecommerce
    • tech
  • Society
    Can China’s Beleaguered Gaming Industry Overcome the New Wave of Restrictions?

    Can China’s Beleaguered Gaming Industry Overcome the New Wave of Restrictions?

    China Cracks Down on Education Industry in Effort to Increase Birthrate

    China Cracks Down on Education Industry in Effort to Increase Birthrate

    The Extraordinary Rise of China’s Pet Industry

    The Extraordinary Rise of China’s Pet Industry

    COVID-19 Could Doom or Deliver US-China Commercial Relations

    COVID-19 Could Doom or Deliver US-China Commercial Relations

    The Year in Social Credit: Where is Corporate Social Credit Going in 2020 and Beyond?

    The Year in Social Credit: Where is Corporate Social Credit Going in 2020 and Beyond?

    Open Government Developments in China: Implications for US Businesses

  • Media

    Gallery: Craig Allen’s Trip to China

    USCBC 45th Annual Membership Meeting

    USCBC 45th Anniversary DC Open House

    USCBC President’s China Visit

    USCBC Hosts Business Roundtable with Zhejiang Party Secretary Che Jun

    USCBC hosts Comprehensive Economic Dialogue (CED) Luncheon

  • Podcasts
No Result
View All Result
  • Operations
    Multinational Supply Chains in a Post-Pandemic China

    Multinational Supply Chains in a Post-Pandemic China

    Managing Risk in the “New Era”

    Managing Risk in the “New Era”

    Design Patents vs. Trade Dress: Protecting IP in China

    Design Patents vs. Trade Dress: Protecting IP in China

    As China Emerges from COVID-19, US Companies Invest to Compete

    As China Emerges from COVID-19, US Companies Invest to Compete

    Inside the Mad Rush for Masks – Anatomy of a 10 Million Mask Order

    Inside the Mad Rush for Masks – Anatomy of a 10 Million Mask Order

    Addressing Risk in the Era of US-China “Great Power” Competition

    Addressing Risk in the Era of US-China “Great Power” Competition

  • Politics
    Hong Kong’s National Security Law, Five Months In

    Hong Kong’s National Security Law, Five Months In

    China Implements its Long-Awaited Unreliable Entities List Mechanism

    China Implements its Long-Awaited Unreliable Entities List Mechanism

    Competing WTO Reform Agendas and the Contest for the Next Director-General

    Competing WTO Reform Agendas and the Contest for the Next Director-General

    China Eyes Further Northeast Asian Economic Integration in RCEP

    China Eyes Further Northeast Asian Economic Integration in RCEP

    COVID-19 Could Doom or Deliver US-China Commercial Relations

    COVID-19 Could Doom or Deliver US-China Commercial Relations

    A Game of Chicken

    A Game of Chicken

  • Tech
    Can China’s Beleaguered Gaming Industry Overcome the New Wave of Restrictions?

    Can China’s Beleaguered Gaming Industry Overcome the New Wave of Restrictions?

    Semiconductor Self-Sufficiency: MIIT’s Ambitions for 2021 and Beyond

    Semiconductor Self-Sufficiency: MIIT’s Ambitions for 2021 and Beyond

    The Growing Intersection of Digital Health and Data Processing in China

    The Growing Intersection of Digital Health and Data Processing in China

    Export Controls on Emerging and Foundational Technologies: A Null Set?

    Export Controls on Emerging and Foundational Technologies: A Null Set?

    How Companies Are Reacting to China’s New Data Security Scheme

    How Companies Are Reacting to China’s New Data Security Scheme

    China’s Participation in International Standards Setting: Benefits and Concerns for US Industry

    China’s Participation in International Standards Setting: Benefits and Concerns for US Industry

    Trending Tags

    • Intellectual Property
    • innovation
    • cybersecurity
    • ecommerce
    • tech
  • Society
    Can China’s Beleaguered Gaming Industry Overcome the New Wave of Restrictions?

    Can China’s Beleaguered Gaming Industry Overcome the New Wave of Restrictions?

    China Cracks Down on Education Industry in Effort to Increase Birthrate

    China Cracks Down on Education Industry in Effort to Increase Birthrate

    The Extraordinary Rise of China’s Pet Industry

    The Extraordinary Rise of China’s Pet Industry

    COVID-19 Could Doom or Deliver US-China Commercial Relations

    COVID-19 Could Doom or Deliver US-China Commercial Relations

    The Year in Social Credit: Where is Corporate Social Credit Going in 2020 and Beyond?

    The Year in Social Credit: Where is Corporate Social Credit Going in 2020 and Beyond?

    Open Government Developments in China: Implications for US Businesses

  • Media

    Gallery: Craig Allen’s Trip to China

    USCBC 45th Annual Membership Meeting

    USCBC 45th Anniversary DC Open House

    USCBC President’s China Visit

    USCBC Hosts Business Roundtable with Zhejiang Party Secretary Che Jun

    USCBC hosts Comprehensive Economic Dialogue (CED) Luncheon

  • Podcasts
No Result
View All Result
China Business Review
No Result
View All Result
Home Environment

China’s New Environmental Protection Tax Law

USCBC by USCBC
May 24, 2017

Industrial fuming pipe against the blue sky. Manufacturing plant.

Share on FacebookShare on TwitterLinkedin

By Weining Hu

In December 2016, the National People’s Congress promulgated China’s first Environmental Protection Tax Law (the EPT Law), replacing the existing Pollutant Discharge Fees (PDF) system in a bid to strengthen the enforcement of environmental regulations. The EPT Law provides guidelines for levying taxes on entities that emit air and water pollutants, solid wastes, as well as noise pollution, and will come into effect on January 1, 2018.  Major contents of the EPT Law, such as taxable items, tax rates, and specification of taxpayers are largely consistent with the existing PDF system. However, changes concerned with tax incentives and administrating authorities significantly differ from the existing law. Given the EPT Law’s impact on China’s tax system, enterprises producing contaminants, as well as taxpayers and new market entrants need to understand the new developments in order to better prepare for future compliance requirements.

Environmental Protection Tax Law versus the Pollutant Discharge Fee system

Taxpayers: As stipulated in the EPT Law, taxpayers are defined as enterprises, public institutions and other business operations that directly discharge taxable pollutants within the territory of China. The EPT Law targets only operators associated with business activities, not individuals or non-business related entities, such as government institutions and the PLA. The meaning of “direct discharge” underscores the geographical location of where pollutants can be discharged. If a company discharges contaminants into open environment where no purification treatment exists, such activity is deemed as violation of the EPT Law. The EPT Law specifies that those discharging pollutants into urban sewage treatment plants and solid waste treatment facilities are exempt from paying tax, whereas factories that discharge pollutants into industrial discharge sewage treatment plants will be subject to taxation.

Taxable items: The EPT Law specifies four categories of taxable pollutants: air, water, solid waste, and noise. An appendix to the EPT Law, the List of Taxable Pollutants and Their Equivalent Volume, provides a comprehensive list of taxable items, which enterprises can use to ascertain the tax standard, and estimate payable tax before the law enters into force. It is noteworthy that certain types of pollutants are exempt from taxation, including pollutants discharged from agricultural production, motor vehicles, ships, aircraft, and legitimate urban sewage treatment plants. Carbon dioxide (CO2), which was debated during the drafting process, is not included on the pollutant list in the EPT law. With improved environment monitoring technology and knowledge, the government may adjust the current taxable scope when it feels it has reached sufficient capacity.

Tax calculations: The EPT calculation mechanism is basically consistent with the PDF system. Tax is calculated based on the volume of the pollutants discharged, multiplied by the respective taxable item’s EPT tax rate.

Two calculation rules are noteworthy. First, the EPT Law provides a minimum tax rate for each pollutant category. The law also grants provincial governments discretion to adjust the applicable tax rate up to ten times the national standard level. Provincial governments may make adjustments based on their respective environmental capacity, economic growth goal, and other development indicators. All adjustments are subject to approval by the Standing Committee of the National People’s Congress. Second, not all air and water pollutants discharged are subject to taxation. For each discharge outlet the bureau taxes the top three air pollutants, the top five items in the first class water pollutant, and the top three items of the other classes. For further instructions on pollutant tax calculation, please refer to our previous article on the EPT Law.

Preferential tax treatments and governing bodies

Preferential tax incentives: The EPT Law rolls out two tax breaks to encourage polluters to reduce emissions of contaminants. If the pollutant emissions are 30 percent less than the permitted pollutant disposal standard, polluters can get a 25 percent cut from the payable amount. If the pollutant emissions are 50 percent less than the stipulated standard, a 50 percent cut from the payable amount will be granted to the subject company.

Collection and administration: The EPT Law grants both tax bureaus and environmental protection authorities the power to enforce new regulations. While tax authorities are in charge of tax collection, the environmental protection authorities are responsible for monitoring pollutants and providing corroborated statistics, helping the former to supervise tax declarations. Related authorities are currently drafting detailed regulations for implementing the EPT Law. Guidelines concerning how to monitor pollutants, how to collect taxes, and how to deal with appeals by taxpayers are still in the drafting process. It is recommended that enterprises keep up to date with the ongoing regulatory changes.

Key takeaways

With changes in China’s tax system, both new market entrants and consolidated foreign investors should identify whether their invested projects are liable to pay environmental taxes under the EPT Law. Foreign investors also need to pay attention to updates concerning implementing regulations and adjusted tax rates set forth by corresponding provincial governments in the operating locations. Since the implementation of EPT Law relies heavily on applications of pollutant monitors, there are business opportunities for those who provide environmental protection services or those who possess pollutant monitor technologies.

About the author: This article first appeared in China Briefing by Dezan Shira & Associates, a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory, and compliance, accounting, payroll, due diligence, and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email [email protected] or visit www.dezshira.com.

Tags: Environmental ProtectionPollutiontax incentives
USCBC

USCBC

Next Post

How to Handle 4 Anticorruption Compliance Issues

Recommended.

Reflections on the Phase One Agreement

January 20, 2022

Can China’s Beleaguered Gaming Industry Overcome the New Wave of Restrictions?

November 29, 2021

From Reshoring to Rightshoring: Dr. Sara Hsu on the Future of US-China Supply Chains

August 4, 2021

China Cracks Down on Education Industry in Effort to Increase Birthrate

July 22, 2021

Latest Podcasts.

A benchmark on how companies are coping with Omicron

May 18, 2022

How companies are approaching China’s changing cyber landscape

May 12, 2022

What does the future of US-China decoupling look like?

May 5, 2022

A look at the latest US exports to China

April 8, 2022
China Business Review

China Business Review is the official magazine of the US-China Business Council, a nonprofit and nonpartisan trade association that represents more than 200 American companies doing business in China.

  • How to contribute to China Business Review

Categories

  • Bilateral Relations
  • Business Etiquette
  • CBR Spotlight
  • China Deals
  • Corruption
  • Cybersecurity
  • Ecommerce
  • Environment
  • Finance
  • Galleries
  • Getting Started
  • HR & Staffing
  • Infographics
  • Innovation
  • Intellectual Property
  • Management
  • Media
  • Operations
  • Opinion
  • Policy & Regulations
  • Politics
  • PR & Marketing
  • Rural Issues
  • Safety
  • Social Policy
  • Society
  • Standards + Licensing
  • Sustainability
  • Tax
  • Tech
  • Top Story
  • Trade
  • Uncategorized
  • US-China Business Council
  • Videos

Tags

Agreements Agriculture Alibaba Best Practices Business Environment China China's Investments Abroad China Market Intelligence Chinese Consumers Chinese Investment Commentary Consumer Trends E-Commerce Economic Trends Energy Environment Events Food Foreign Investment Going Global Healthcare Reform Human Resources Infrastructure Internet Interview Investment Investments into China IPO Joint Venture Labor Legal Analysis M&A Manufacturing Media National People's Congress Q&A Strategic and Economic Dialogue Supply Chains Technology Trade Transparency US-China Relations USCBC US Exports to China Xi Jinping

Join our Mailing List

Sign up for the US-China Business Council's newsletters to stay ahead of the game with roundups, analysis, and commentary.

Sign Up

Follow Us

  • About
  • USCBC
  • Submit a Story
  • Archive

© 2021 China Business Review

No Result
View All Result
  • Operations
  • Politics
  • Tech
  • Society
  • Media
  • Podcasts

© 2021 China Business Review