China's First "Green Tax Law" –Environmental Protection Tax Law Implemented in 2018

Date:  2018-06-30    Autor:   WU, Cathy

Keyword: Environmental Protection Tax

I.              Overview:

After six years of legislative process and two deliberations, the "Environmental Protection Tax Law of the People's Republic of China" was passed at the 25th session of the Standing Committee of the 12th National People's Congress. And it was implemented on January 1, 2018. At the same time, the State Council promulgated the State Council Order No. 693, "Enforcement Regulations of the People'sRepublic of China on Environmental Protection Tax Law".

Main Changes:

For pollutants such as atmospheric pollutants, water pollutants, solid waste, and noise, the pollutant discharge fee was collected by the environmental protection department in the past. It is now replaced by the taxation department. It means that the construction of an ecological civilization will have laws to follow; moreover,it also means that the 40-year sewage charge system will be withdrawn from the stage of history.

II.             Who are the taxpayers of “green tax”?

Within the territory and other sea areas under the jurisdiction of the People's Republic of China

1)      Enterprises and institutions directly discharging taxable pollutants to the environment

2)      Other producers and operators who directly emanate taxable contaminants to the environment

In other words, those who do not discharge taxable pollutants to the environment directly are no subject to environmental taxes. Also, individuals are excluded as the tax payersand do not pay environmental taxes.

è Relevant regulations: In any of the following circumstances, which are not circumstances of direct emission of pollutants into the environment, the environmental protection tax shall not be paid for corresponding pollutants:

1)      Enterprises,entities, other producers and operators that directly emit taxable pollutants into the centralized sewage and domestic waste treatment facilities established by law;

2)      Enterprises,entities, other producers and operators that store or dispose of solid wastes in facilities or place that meet the national or local standard of environmental protection.

III.            How is the "green tax" tax rate standard formulated?

Different provinces of PRC have determined the regional environmental protection tax rate in accordance with the tax rate range specified in the environmental protection law. And the tax rate varies due to the factors such as the environmental carrying capacity of the region, the current status of pollutant discharge, and the economic and social ecological development goals. Take Shanghai for an example:

Air Pollution unit/CNY

Water Pollutionunit/CNY

carbon  dioxide                 6.65

Nitrogen  oxides                7.6

Other air  pollution              1.2

Cod                                5.0

Ammonia  nitrogen         4.8

Other water emit             1.4

IV.           Tax relief

Under any of the following circumstances, the environment tax are temporarily exempted

1)      Taxable pollutants emitted from agricultural production (excluding scale-intensive farming)

2)      Taxable pollutants emitted by such mobile sources as motor vehicles, locomotives, non-road mobile machinery, ships, and aircraft;

3)      Taxable pollutants emitted from lawfully established centralized urban sewage and domestic waste treatment facilities without exceeding the national or local standard;

4)      Solid waste comprehensively utilized by the taxpayer in line with the national or local standard of environmental protection; and

5)      Other tax-exempt circumstances approved by the State Council.

Any tax-exempt circumstances as provided in the forgoing Paragraph 5 shall be submitted by the State Council to the Standing Committee of the National People's Congress for filing.

V.            When is the tax declaration due?

The "green tax" starts on January 1, 2018. It is calculated on a monthly basis and filling on a quarterly basis. April of 2018 is the first declaration period.

VI.           Conclusion

"Environmental protection tax" promotes the transformation of enterprises to "green enterprises" by actively reducing emissions and adopting energy-saving production. The idea of this mechanism is “more emissions equal to more taxes,less emissions leads to less tax, and even benefit with tax incentives”. The environmental tax law and its implementation regulations are of great significance for protecting and improving the environment, reducing the discharge of pollutants and promoting the construction of ecological civilization.

If you have anyproblems in the monthly tax declaration or you would like to have more insight of the environmental tax, please feel free to contact us and ECOVIS professionalsare more than happy to provide answers and solutions.

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