China: Resource Taxes Adjusted for Rare Earth, Tungsten, Molybdenum

(May 12, 2015) On April 30, 2015, China’s Ministry of Finance and the State Administration of Taxation issued a joint notice on adjustments to the resource tax levied on rare earth, tungsten, and molybdenum, to be applied from May 1, 2015. As of that date, the tax on the three materials, including on the raw ore and on the concentrate (the product derived from mining the ore and removing the waste), “is levied on the basis of value rather than volume.” (Yan Zhuang, China (People’s Rep.): Resource Tax on Rare Earth, Tungsten and Molybdenum Adjusted, TAX NEWS SERVICE (May 8, 2015), International Bureau of Fiscal Documentation online subscription database; Notice on Implementation of the Revision of the Ad Valorem Resource Tax on Rare Earth, Tungsten, and Molybdenum, Cai Shui [2015] No. 52 (Apr. 30, 2015), State Administration of Taxation website (in Chinese).)

The materials are important for the production of electronic goods; rare earth elements are used, for example, “in hybrid car batteries, flat-panel displays, mobile phones, disk drives, wind turbines and energy-efficient lighting.” (Bryce Baschuk, U.S. Cheers Chinese Elimination of Rare Earth Export Restrictions, WTO REPORTER (May 4, 2015).) The formula for calculation of the tax is: the tax payable equals the total income of sales of concentrate times the applicable tax rate. (Notice, item 1, 3.) The new tax rates are:

  • for light rare earth:
    11.5% in the Inner Mongolia Autonomous Region,
    9.5% in Sichuan Province, and
    in Shandong Province
  • 27% for middle and heavy rare earth
  • 6.5% for tungsten; and
  • 11% for molybdenum. (Yan Zhuang, supra; Notice, item 2.)

The notice also provides information on how to determine sales income; how to convert ore sales to concentrate sales for purposes of the resource tax calculation and payment; taxation of symbiotic minerals and of associated ore; the tax payment cycle; the payment venue; and other tax collection matters. (Notice, supra.)

Furthermore, in light of a 2014 World Trade Organization ruling against China (153 WTO, Aug. 8, 2014) indicating that it had violated trade commitments through its imposition of quotas, duties, and other measures on its rare earth exports, the country’s Customs Tariff Commission issued a decision in April 2015 indicating that it would eliminate such export restrictions on rare earth, tungsten, and molybdenum. (Baschuk, supra; Customs Tariff Commission of the State Council on the Adjustment of Export Tariffs on Some Products, Shui Weihui [2015] No. 3 (Apr. 14, 2015, in force on May 1, 2015) (in Chinese); China — Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum, Dispute DS431, World Trade Organization website (up-to-date as of Feb. 6, 2015).)

According to U.S. trade officials, this measure “will put positive pressure on China’s disproportionately low domestic prices for rare earth elements,” putting a stop to the duties and quotas that “had forced American manufacturers to pay as much as 300 percent more than what their Chinese competitors pay for the same materials,” U.S. Trade Representative Michael Froman stated. (Baschuk, supra.)

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Date: May 01, 2015
Author: Ministry of Finance State Administration of Taxation
Original Source: Ministry of Finance State Administration of Taxation

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