Comments to the MOF's Resource Tax Law of the People's Republic of China

2017-12-20 | All chapters

We understand the original intention for the State to adjust the tax policy for Chinese-foreign cooperation in exploiting oil and gas resource. However, the Draft Law cancelled the previous “old contracts are subject to old measures” treatment provided by the State Council which have been allowing oil and gas “Product Sharing Contracts (PSCs)” signed before November 2011 to continue to apply Royalty instead of Resource Tax until the termination of contracts.  This cancellation will have material adverse impact on the contractors’ economic benefits (for both Foreign and Chinese contractors), and will trigger significant changes to several articles of the signed and approved PSCs.  In addition, such big change in tax policy may weaken the willingness of foreign energy companies to invest in China’s oil and gas exploitation and production.