Comments to the SAT's Urban Maintenance and Construction Tax Law

2018-11-15 | All chapters

The European Chamber welcomes SAT’s consultation with the public on the new Urban Maintenance and Construction Tax Law (“UMCT”). It is in line with the “statutory principles on taxation” to upgrade the provisional regulations of the Urban Maintenance and Construction Tax promulgated by the State Council in February 1985 (hereinafter referred to as “the Provisional Regulations”) into law. The tax basis and taxable scope of UMCT (Draft for Soliciting Opinion) are, in general, consistent with the Provisional Regulations and existing relevant tax policies. Meanwhile, adjustments are made to some provisions  in the  urban maintenance and construction tax accordingly.  

Regardless, further considerations may be needed on the following three aspects of the UMCT:

  1. Eliminating the 1% tax rate will increase the operating cost of the chemical companies, which is not conducive to their normal operation. To protect the environment, the State requires chemical companies to relocate into the chemical industrial parks. The chemical industrial parks are generally not located in urban areas, counties or towns, but in remote suburbs If the tax rate is raised from 1% to 5%, the operating cost of chemical companies will be greatly increased.
  2. EUCCC fully understands that out of the taxpayers to whom the 1% tax rate is applied, most are registered in non-urban areas, but their production and operation are in urban areas, resulting in unfair tax burden. However, this problem can be solved by strengthening tax collection and administration management.
  3. While VAT and consumption tax on export goods, labor services, cross-border sales services, intangible assets, or due to the implementation of preferential tax policies on exports, are refunded, the paid UMCT is not refunded. This practice is contrary to the principle laid out by the State to fully implement tax and fee cuts and reduce systematic costs on the real economy. 

Given the changes brought about by the new tax law of UMCT, we suggest that a more cautious approach be taken to ensure that the new law of UMCT should not change the fundamental tax framework currently in place and tax overall burden level.