In accordance with the decisions and arrangements of the Party Central Committee and the State Council, the Ministry of Finance and the State Administration of Taxation... 5 Moon 10 Japan jointly issued a statement announcing that, starting from... 2016 Year 7 Moon 1 Starting today, China is fully rolling out the resource tax reform, following... 5 Moon 1 Following the full-scale rollout of the pilot program for replacing business tax with value-added tax, this is yet another major tax reform introduced by China.

　　According to the "Notice on Fully Promoting the Reform of the Resource Tax" issued by the two departments, China will launch a pilot program for the reform of the water resource tax, starting with a pilot project in Hebei Province. Under this reform, the water resource fee will be converted into a tax, and both surface water and groundwater will be brought under the scope of taxation. The tax will be levied based on a fixed quota per unit of water consumed. For industries with high water consumption, users exceeding their planned water allocations, and those drawing groundwater in areas experiencing excessive groundwater extraction, the tax rates will be appropriately increased. Meanwhile, the tax burden on normal water use for production and daily life will remain unchanged. Based on a comprehensive review of the pilot program’s experience, the Ministry of Finance and the State Administration of Taxation will select other regions to gradually expand the scope of the pilot program, and once conditions are ripe, the reform will be rolled out nationwide.

　　Other natural resources will be gradually brought under the scope of taxation. Given that the market development and utilization of resources such as forests, grasslands, and tidal flats vary significantly across different regions, conditions for fully implementing resource taxes on these resources are not yet mature. Therefore, this reform does not uniformly prescribe nationwide taxation of forests, grasslands, and tidal flats. However, for those resources that meet the necessary conditions for taxation, provincial-level governments are authorized to, based on local realities and taking into account the specific circumstances of forest, grassland, and tidal-flat development and utilization, submit detailed proposals for implementing resource taxes. Such proposals, after being approved by the State Council, may then be put into effect.

　　China will fully implement the ad valorem taxation method. Building on the previous reform that has already introduced ad valorem taxation for six resource categories—crude oil, natural gas, coal, rare earths, tungsten, and molybdenum—this latest reform will extend ad valorem taxation to the vast majority of mineral products. However, guided by the principle of facilitating tax administration, a few mineral products—such as clay and sand and gravel—which are characterized by dispersed operations, predominantly cash transactions, and difficult-to-control tax compliance—will continue to be taxed based on fixed quotas per unit quantity.

　　China will comprehensively clean up fee-based funds to address the issue of overlapping taxes and fees for enterprises. Under this reform, the rate of the mineral resource compensation fee for all resource commodities will be reduced to zero, the price adjustment fund will be discontinued, and locally established fee-based fund projects that illegally levy charges on mineral resources will be abolished, thereby effectively easing the burden on enterprises.

　　Given the differences in resource endowments and economic development levels among various regions, in order to avoid increasing the structural burden on enterprises due to a uniform tax rate, this reform has been centrally standardized to set a range for tax rates on mineral products. Within the prescribed tax-rate range, provincial people's governments may submit specific proposed tax rates for major taxable products to the Ministry of Finance and the State Administration of Taxation for approval and implementation after obtaining their confirmation.

　　In addition, to promote the comprehensive utilization of resources, this reform provides tax incentives for resources that are difficult to mine, costly to extract, and suitable for comprehensive utilization. Specifically, for mineral resources extracted from mines in the depletion phase using backfill mining methods—provided they meet the relevant criteria—the resource tax will be reduced accordingly. 50% and 30% Meanwhile, for mineral products extracted from low-grade ores, waste rock, tailings, waste residues, wastewater, and exhaust gases that are encouraged for utilization, the provincial people's governments are authorized to determine, based on actual conditions, whether to reduce or exempt taxes, enabling local governments to adopt targeted measures tailored to local circumstances.