PROVISIONAL RULES OF THE PEOPLE’S REPUBLIC OF CHINA ON CONSTRUCTION TAX
(Promulgated 25 June 1987 by the State Council)
SUBJECT: TAXATION
ISSUING-DEPT: STATE COUNCIL OF CHINA
ISSUE-DATE: 06/25/1987
IMPLEMENT-DATE: 07/01/1987
TEXT:
[Article 1] These Rules are formulated to control the scale of fixed asset investment and to readjust the structure of investment, in order to centralise funds and guarantee key State construction.
[Article 2] A local government, administrative agency, armed forces unit, State enterprise or public institution, collective enterprise or collective public institution, or individual industrial or commercial household operation which uses funds as stipulated below to undertake self-raised investment in capital construction, investment in construction as part of a technology renovation project, or investment in construction which, in accordance with regulations, is not listed in the State’s fixed asset investment plan (hereinafter referred to as self-raised investment in Construction) shall be deemed to be a party with an obligation to pay Construction Tax (hereinafter referred to as a taxpayer) and shall pay Construction Tax in accordance with the provisions of these Provisional Rules. The types of funds are:
(i) capital funds outside the State budget;
(ii) local reserve funds;
(iii) bank loans (including foreign exchange loans);
(iv) the various private funds of an enterprise or public institution (including funds gathered by the department in charge for readjustment purposes); or
(v) other self-raised funds.
[Article 3] Construction Tax shall be levied at the following differential tax rates:
(i) When it is a project listed in the State plan, the tax rate on self-raised investment in a capital construction project or investment in construction as part of a technology renovation project, by a local government, administrative agency, armed forces unit or State enterprise or public institution shall be 10%. Where the annual amount of self-raised investment in a capital construction Project exceeds the amount specified in the State plan, the tax rate on the excess amount shall be 20%. Where the fixed asset investment plan which, in accordance with regulations, should be submitted to the tax authority and the bank engaged to collect Construction Tax is not in fact submitted, or the nature of the self-raised investment of the construction project is not classified as required, the tax rate on such investment shall be 20%.
(ii) When it is not a project listed in the State plan, the tax rate on self-raised investment in capital construction project or investment in construction as part of a technology renovation project by a local government administrative agency, armed forces unit or State enterprise or public institution shall be 20% and the tax rate on construction investment which, in accordance with regulations, is not included in the State’s fixed asset investment plan shall be 10%.
(iii) The tax rate on self-raised investment in a construction project in a city, township or rural area by an urban or township collective enterprise or public institution, or in a city, suburb, country town, country administered town or an industrial and mining area by a township enterprise or an individual industrial or commercial household operation shall be 10%.
A province, autonomous region or directly administered municipal people’s government may decide to impose a 10% Construction Tax levy on self-raised investment in a construction project in rural area by a township enterprise or individual industrial or commercial household operation if the particular undertaking or project requires control or readjustment.
(iv) The tax rate on a hotel (including a tourist hotel), guest house, convalescent hospital (home), theatre, auditorium, conference hall, office building or exhibition building (centre) which is not listed in the State plan, on any other non-productive construction project which is subject to strict control, or on a newly built or expanded building of the type mentioned above where construction is supposedly carried out in the name of maintenance rebuilding, but the standard of the building is raised, shall be 30%.
[Article 4] Investment as stipulated in Article 3 of these Rules, in the form of self-raised investment in capital construction or investment in construction as part of technology renovation, in a project listed in the State plan, refers to construction investment which is organised by a provincial, autonomous region or directly administered municipal planning commission, economic commission or one of the various State Council departments in charge, in accordance with the annual plan of the State Planning Commission on self-raised investment in capital construction or investment in construction as part of a technology renovation project, and relevant regulations.
Differentiation between a technology renovation project and a capital construction project shall be determined in accordance with standards prescribed by the State.
[Article 5] the following types of self-raised investment in construction shall be exempt from Construction Tax:
(i) investment in production facilities for the development of energy resources (including economising on energy resources), communication facilities, educational facilities for a school, hospital facilities, or scientific and research facilities for a science and research institution;
(2) investment in a project or its necessary construction accessories through the use of loan provided by an international financial institution, a foreign government loan or donation, or other donations from abroad;
(3) investment arranged in accordance with the State capital construction plan and funded with a loan in replacement of government appropriation, and investment in a large or medium scale capital construction project financed with a loan issued by the People’s Construction Bank of China, the Industrial and Commercial Bank of China or The Bank of China;
(4) investment through a specific item capital construction loan approved by the State Council;
(5) investment in a social welfare project or pollution control and environment protection project, as well as investment in any restoration construction which is necessary as a result of a natural disaster; or
(6) investment which is specifically approved by the Ministry of Finance as being exempt from Construction Tax
If a taxpayer undertaking other forms of self-raised investment in construction, requires the State to grant support and special consideration and the total amount of taxable investment is less than 500,000 yuan, a reduction of or exemption from Construction Tax may be granted at discretion of the provincial, autonomous region or directly administered municipal people’s government.
[Article 6] Construction Tax shall be calculated on the basis of the actual amount of investment subscribed by a taxpayer in a year.
A taxpayer shall, within 15 days of receiving the approved annual capital construction of investment plan or the technology renovation project investment plan, pay in advance to a local bank where an account is held the amount of Construction Tax payable according to the amount of investment stipulated in the annual plan. Accounts shall be settled within two months of the end of the year and the final account settlement shall be made on the completion of construction.
[Article 7] when a taxpayer submits a plan for self-raised investment in construction, the taxpayer shall have sufficient funds to pay the amount of Construction Tax required in accordance with regulations. If sufficient funds are not raised as required, the planning department in charge of examination and approval shall not consider the application.
[Article 8] Tax authorities shall be responsible for the collection and administration of Construction Tax. The People’s Construction Bank of China, the Industrial and Commercial Bank of China, the Agriculture Bank of China and other relevant account holding banks shall be responsible for collecting Construction Tax on behalf of tax authorities. If Construction Tax is not paid within the specified period, the collecting bank shall, in conjunction with the tax authority, adopt withholding measures.
[Article 9] When assigning annual fixed asset investment plans, the planning commission, economic commission and department in charge at the relevant level shall clearly indicate whether it is self-raised investment in a capital construction or technology renovation project, or whether self-raised investment in a capital construction or technology renovation project which is not listed in the plan. A copy of this statement shall be sent to an equal level tax authority, the local tax office in the area where the construction is located and the collecting bank.
[Article 10] The collection and administration of Construction Tax shall be handled in accordance with the Provisional Regulations of the People’s Republic of China on the Collection and Administration of Tax Revenue.
[Article 11] The Ministry of Finance shall be responsible for the interpretation of these Provisional Rules and for the formulation of detailed implementing rules.
[Article 12] These Provisional Rules shall take effect from 1 July 1987 and, at same time, the Provisional Measures for the Collection of Construction Tax shall be annulled.