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Extension Of China's Resource Tax Is Confirmed

by Mary Swire, Tax-News.com, Hong Kong

22 December 2010


China is to extend its new resource tax on natural gas and oil sales to twelve more of its western provinces in an effort to inject revenue into the poorest regions of the country, which are badly in need of investment in infrastructure and jobs.

In June this year, the Chinese government introduced the new tax on oil and natural gas extracted in the western province of Xinjiang, with much of the revenue collected being ploughed back into its economic development. It was reported that the tax had begun to be collected in the new provinces on December 1, and therefore could now be expected to increase tax revenues substantially in those provinces as well.

The tax is charged at a rate of 5% of the value, rather than the quantity, of oil and natural gas sold. However, resources used within the producing company, or as an input for other products, are free of tax.

China had previously applied a tax of up to CNY30 (USD4.50) per tonne of crude oil sold, and up to CNY15 on every 1,000 cubic meters of natural gas sold. That was felt to be too low given the large increase in oil and gas prices, and it was considered that an ad valorem tax would be more appropriate.

TAGS: tax | China | oil and gas | tax rates

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