ANNOUNCEMENT 01 Aug 2011
On 1 August 2011, the Ministry of Finance issued Notice No. 39 of 2011 to provide conditional relief for selected domestic LNG companies. The meausre is announced to be in force until 2020.
NUMBER OF INTERVENTIONS
PRC Ministry of Finance, August 1st, 2011. (财关税39号 关于对2011-2020年期间进口天然气及2010年底前“中亚气”项目进口天然气按比例返还进口环节增值税有关问题的通知)
OECD Fossil Fuel Government Support Database, accessed May 21st, 2019.
When import prices are above domestic wholesale prices, 7 specified Chinese importers will benefit from a VAT reduction to compensate for the difference.
Refunds would be given proportional to the difference between the final import price, and domestic purchase price of the gas, calculated by averaging data for each quarterly period.
The scheme sought to alleviate the huge losses that natural gas importers in the PRC were incurring up to this point in order to feed the increased demand for the gas and keep the industry healthy.
UPDATE: Investigations by the OECD revealed that PetroChina, one of the biggest firms in this sector in the PRC, received between USD 723m-1.16bn (CNY 5-8bn) annually over the 2011-2017 period through this policy.
According to the Notice, as long as the import price is higher than the local wholesale market price between 2011 and 2020, the imported liquefied natural gas for Central Asian Pipeline, Shanghai, Jiangsu, Guangdong, and Fujian projects can benefit from import VAT refund.