China: UMCT and EST will be levied on Foreign Invested Enterprises and Individuals from December 1, 2010
On October 18, 2010, the State Council issued the Circular on Unifying Urban Maintenance and Construction Tax (UMCT) and Education Surtax (EST) System for Domestic and Foreign Invested Enterprises (the “State Circular 2010”GUOFA  NO.35) announcing to levy UMCT and EST on foreign invested enterprises (FIEs) and foreign individuals from December 1, 2010.
In accordance with the State Circular 2010 released by the State Council, on November 4, 2010, the Ministry of Finance and the State Administration of Taxation jointly released the Circular on Levying Urban Maintenance and Construction Tax and Education Surtax System on Foreign Invested Enterprises(the “CAISHUI Circular 2010”, CAISHUINO.103).
On February 8, 1985, China adopted the Provisional Regulations of the People's Republic of China on City Maintenance and Construction Tax; on April 28, 1986, China adopted the Provisional Regulations of the People's Republic of China on Education Surtax, and in accordance with these two Regulations both UMCT and EST are not applicable to foreign invested enterprises and foreign individuals, and only applicable to domestic companies and individuals.
After exemption from UMCT and EST taxation for 25 -26 years, in accordance with the State Circular 2010 and theCAISHUI Circular 2010 , UMCT and EST will be levied on FIEs and foreign individuals from December 1, 2010, then there will be no difference on these two kinds of taxation between domestic and foreign companies. It is said that this is a further step of China government’s efforts to unify taxation system for both domestic PRC enterprises and FIEs in China.
Any Evidence-Based Deliberation:
|Is there anything in the public record to suggest that evidence of the effectiveness of the proposed measure was considered during official deliberations?|
|Is there any evidence that alternatives to the proposed measure were considered?|
|Is there anything in the public record that suggests that empirical evidence informed the comparison across the alternatives available to government?|
|Was such evidence identified?|
|Is such evidence publicly available?|
|Did the official decision-maker in question provide an explanation as to why a chosen measure was favoured over alternatives?|
|Is there any evidence to suggest that potentially affected trading partners were consulted before the measures were taken?|
|Is there any evidence that safeguards have been put in place to ensure that implementation of the initiative is transparent and non-discriminatory?|
|Did the government state its intention to review the measure within one year of implementation?|
Date Discovered: 21/11/2010
Date of inception: 18 Oct 2010
GTA Evaluation: Red
State Circular 2010 http://www.gov.cn/zwgk/2010-10/21/content_1727094.htm
CAISHUI Circular 2010 http://www.chinatax.gov.cn/n8136506/n8136593/n8137537/n8138502/9969625.html