Alert – China introduces nationwide resource tax and adjusts tax rate

14 October 2011

On 1 November 2011, the State Council of the People's Republic of China's Decision on amending the Provisional Regulations of the People's Republic of China on Resource Tax (Decision) will take effect. The Decision increases taxes on the sales of certain resources and extends certain existing resources tax nationwide.

The Decision amends the Provisional Regulations of the People's Republic of China on Resource Tax which has been in force since 1 January 1994. 

The underlying purpose of the Decision is to benefit the nation's less affluent western regions, which are rich in oil, gas and coal reserves. China's current resource tax is levied on production volume rather than sales value, which does not truly reflect the increase in profits resulting from commodity price rises in the energy and mining market.

Under the Decision:

  • sales of crude oil and natural gas nationwide are taxed at between 5%—10% of the sales value of products
  • sales of coking coal are taxed between 8.00—20 yuan per ton
  • sales of rare earth ore are taxed ranging from 0.40—60 yuan per ton.

Taxes on other types of resources remain unchanged. The table below lists the affected items and the new tax rates:

Taxable Items Tax Rates 
Crude oil 5%-10% of sales value
Natural Gas 5%-10% of sales value
Coal Coking coal 8-20 yuan/ton
Other types of coal 0.3-5 yuan/ton
Other non-metal ores Cheap non-metal ores 0.5-20 yuan/ton or cubic meter
Precious non-metal ores 0.5-20 yuan/kg or carat
Ferrous metal ores 2-30 yuan/ton
Nonferrous metal ores Rare earth ore 0.4-60 yuan/ton
Other nonferrous ore 0.4-30 yuan/ton
Salt Solid salt 10-60 yuan/ton
  Liquid salt 2-10 yuan/ton

The Decision is an indication of China's efforts to encourage energy conservation and limit environmental damage.

The national extension of the taxes would not have any impact on the domestic prices of oil and gas which are under strict state regulation, but would affect the profits of major oil and gas companies. Reforms to other resources are expected soon.

Author(s) Geraldine John-Putra, He Zhang