This year, China is going to effectively start its battle against environmental pollution. Announced by the State Council, the Implementation Rules for the Environmental Protection Tax Law (EPT Law) and the Law itself took effect on January 1st, 2018. Businesses in China, and prospected market entrants, need to fully understand the Law’s implications and implementation to legally operate in the market without facing high impacts on their finances. In addition, the Law sets new opportunities for foreign companies in environmental protection fields.
The Environmental Protection Tax Law
The Law is China’s first “green tax law” expressively aiming at promoting environmental protection and reducing pollution. It abolishes the previous system of “pollutants discharges fee” and establishes a tax that will impact China’s tax system.
Reportedly, the Environmental Protection Tax Law’s purpose is to “protect and improve the environment, reduce pollution discharges, and promote ecological civilization”.
Taxpayers are as follows:
- Public Institutions;
- Other producers or operations that directly discharge pollutants into the environment.
Taxable pollutants refer to:
- Atmospheric pollutants;
- Water pollutants;
- Solid waste;
- Construction site noise.
Tax calculation: volume of pollutants discharged x taxable item Environmental Protection Law’s tax rate.
The Law gives a rate threshold for each category of pollutants. Local tax bureaus can decide their specific tax rate, within the range specified at central level. Also, the tax revenues are now entirely collected by local governments; while before, 10% was kept by the central government.
If a company files a volume of pollutants much lower than the figure filed the year before, it would be regarded as “abnormal”. Therefore, the Law requires to the Environmental Protection Authorities a review on abnormal data.