On 4 November 2010, the PRC State Administration of Taxation and
the Ministry of Finance jointly issued the Tax Circular Caishui
[2010] No. 103 to levy City Maintenance and Construction Tax
("CMCT") and Education Surcharge also on foreign
enterprises, foreign invested enterprises and foreign
individuals. The Circular took effect on 1 December
2010.
CMCT and Education Surcharge are two types of surcharges, levied on
taxpayers who pay VAT (excluding import VAT), Consumption Tax
("CT", excluding import CT) and Business Tax
("BT") in China. Each surcharge is calculated as a
percentage of the actual amount of the VAT, CT and BT paid by the
taxpayers. Education Surcharge is calculated at 3% of the
VAT, CT and BT payments. Depending on the location, the CMCT
rates differ as follows:
1. If the tax payer (or the tax withholding agent in case of a foreign enterprise) is located in an urban area, the rate is 7% of the VAT, CT and BT payments;
2. If the tax payer (or the tax withholding agent in case of a foreign enterprise) is located in a county or township area, the rate is 5% of the VAT, CT and BT payments;
3. If the tax payer (or the tax withholding agent in case of a foreign enterprise) is located in other areas, the rate is 1% of the VAT, CT and BT payments.
The above surcharges have already been introduced in 1985 and
1986 respectively. However, so far, they have been only
imposed on domestic enterprises and Chinese individuals. In
the past, foreign enterprises, foreign invested enterprises and
foreign individuals were specifically exempted from them.
The above Circular now also requires foreign enterprises, foreign
invested enterprises and foreign individuals to pay these two
surcharges. This change will increase the tax burden of
foreign enterprises, foreign invested enterprises and foreign
individuals in China. They should take these additional tax
costs into consideration for their business calculations.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 23/12/2010.
