The Urban Maintenance and Construction Tax Law of the People's Republic of China (hereinafter the ‘UMCT law’) and the ‘Announcement on Determination of Tax Base for UMCT’ (hereinafter the ‘Announcement No. 28’) which came into effect on 1 September 2021 have introduced some changes and clarifications that could have a significant bearing on a taxpayer’s indirect tax burden.
In previous regulations, the indirect tax surcharges including urban maintenance and construction tax, education surcharge and local education surcharge were levied at a rate of up to 12% of the sum of the actual tax payment of VAT and consumption tax. While maintaining the same principles, rates and measures of the temporary regulations, the new UMCT law and the Announcement No. 28 introduced the following changes and clarifications for the calculation of the tax base:
All entities and individuals that pay VAT and consumption tax are taxpayers of the above-mentioned surcharges. The time when a tax liability arises for surcharges shall be the same as that for VAT and consumption tax, and these liabilities shall be paid simultaneously.
To further optimise the business environment and effectively reduce the burden of taxpayers, tax declaration procedures are also simplified. The State Administration of Taxation is actively promoting a combined declaration of surcharges, VAT and consumption tax, and aims to achieve a synchronised and simultaneous levy in all situations in a timely way.
Announcement  No. 20 of the State Taxation Administration has clearly stipulated that as from 1 August 2021, the declaration forms for VAT and consumption tax shall be integrated with that for indirect tax surcharges, and the combined declaration forms shall be put into use.
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