Transfers of Natural Resource Use Rights Subject to Business Tax

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Jan. 23 – China’s State Administration of Taxation (SAT) recently clarified the tax treatment towards transfers of natural resource use rights.

According to the “Circular on Business Tax (BT) Policies on Natural Resource Use Right Transfers (caishui [2012] No.6)” issued on January 6, 2012, transfers of natural resource use rights – namely transfers of the rights to explore, exploit and employ natural resources – will be regarded as one type of intangible asset transfers.

The “transfer of natural use rights” will be added as a subhead under the tax item “Intangible Asset Transfer” in the “Annotations to BT Items (Pilot Version) (guoshuifa [1993] No.149)” released by the SAT in December, 1993.

Natural resource use rights include sea area use rights, mineral exploration as well as exploitation rights, water intake rights, and other rights to use natural resources (excluding land use right), Circular No. 6 clarifies.

The transfers of natural resource use rights by local governments or local administrative departments of natural resources above county levels are exempt from BT.

The Circular also specifies that transfers of natural resources located within borders are regarded as “domestic transfers.”

The new Circular will take effect on February 1, 2012.

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, visit, or download the firm’s brochure here.

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