China Expands Tax Incentives to Promote Circular Economy
Nov. 28 – China will reduce or eliminate value-added tax (VAT) burdens on enterprises that recycle wasted resources during production, in a bid to further promote the country’s circular economy that makes industrial manufacturing more environmentally friendly.
The “Circular on Adjustments of VAT Treatment to Products and Services Output through Comprehensive Utilization of Resources (caishui  No.115)” released by the State Administration of Taxation and Ministry of Finance on November 21, grants an increasing number of recycling companies the eligibility to enjoy favorable VAT treatment.
Starting from August 1, 2011, the following services and product sales are completely exempt from VAT imposition when specific criteria are met:
- Construction sand and gravel aggregate self-produced with the use of construction waste and gangue
- Services of waste disposal and sludge treatment
100 percent-VAT refund upon collection
Starting from August 1, 2011, the sale of the following self-produced products can receive a 100 percent VAT refund upon collection when certain criteria are met:
- Electricity and heat produced with the use of residual heat and pressure during industrial production
- Electricity and heat produced with the use of organic waste types detailed in the Circular
- Dry sludge and fuel produced with the use of the sludge generated from waste-water treatment
- Feed-grade mixed oils produced with the use of waste animal/vegetable oils
- Industrial oils produced with the use of recycled waste mineral oils
- Emulsifying agents (for emulsified oils) and waterproofing membrane accessories produced with the use of the oil field sludge generated from oil recovery
- Wigs produced with the use of human hair
80 percent-VAT refund upon collection
Starting from January 1, 2011, the sale of the following self-produced products can enjoy a 80 percent VAT refund upon collection when certain criteria are met:
- Fiberboards, particle boards, blockboards, activated carbon, tannin extract, hydrolyzed alcohol and carbon rods produced with the use of the three types of agricultural and forestry residues stipulated in the Circular
- Cardboards produced with the use of salix
50 percent-VAT refund upon collection
Starting from August 1, 2011, the sale of the following self-produced products – when meeting specific criteria – can be eligible for a 50-percent VAT refund upon collection:
- Paper products produced with the use of bagasse (VAT refund available starting on January 1, 2011)
- Alumina and activated calcium silicate produced with the use of fly ash and gangue
- Sludge microbial protein produced with the use of sludge
- Porcelain insulators and calcined kaolin produced with the use of gangue
- A collection of metals (as specified in the Circular) produced with the use of industrial metal wastes (as listed in the Circular)
- Gasoline, diesel fuel, waste plastic/rubber oils, petroleum coke, carbon black, recycled pulp, aluminum powder, recycled materials for automobiles, motorcycles, household electrical appliances, pipes, chemical fibers as well as bottles and recycled plastic products produced with the use of waste plastics, waste PVC products, waste rubber products and aluminum composite paper packaging materials
- Yarns, weaved cloth, non-woven fabrics, felt, adhesives and recycled polyester products produced with the use of waste natural/chemical fiber products
- Four types of graphite products (as detailed in the Circular) produced with the use of waste graphite
Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in China. The firm specializes in assisting foreign enterprises with their tax obligations. For advice, please email email@example.com, visit www.dezshira.com, or download the firm’s brochure here.
The China Tax Guide (Fifth Edition)
This popular book, fully updated with all recent tax changes and amendments, details all taxes in China affecting businesses and individuals, how to calculate the amounts due, tax registration and filing procedures, tax minimization techniques, and claiming VAT rebates. It also details good financial management techniques, handling negotiations with the tax bureau and annual audit and compliance procedures.