China to implement water resource tax nationwide from December 1, 2024 
On October 16,2024, the Ministry of Finance of China issued the “Implementation measures for water resource tax reform pilot” and announced that the water resource tax will be implemented nationwide from December 1, 2024.
China started the polit projects to switch from water resource fees to water resource taxes in nine provincial-level regions in 2016, including Hebei, Beijing, and Henan. With the promulgation of the Measures, the water resource tax will be implemented nationwide. By replacing the water resource fee with the water resource tax, enforcement power will be strengthened, and it is expected to prevent non-payment of water resource fees.
The tax rates will be set by each province, with the minimum average tax rate set by the central government. The Ministry of Finance is calling on local governments to set a reasonable tax rate to ensure that the burden on water resource users does not increase, except for some high-water resource consumption businesses such as golf courses. As the actual payers of the water resource tax are entities and individuals such as waterworks bureaus that draw water directly from surface water or groundwater, there will be no significant impact on businesses that use tap water, according to a Ministry of Finance official.
Taxpayers of water resource tax
Any entity or individual that directly withdraws water from surface water or groundwater within the territory of China shall be the taxpayer and shall pay the water resource tax in accordance with the Measures.
How to calculate the water resource tax
Calculation formula
Except for special industries such as public water supply companies and hydroelectric power plants, the water resource tax is calculated using the following formula:
Water resource tax payable = actual water withdrawals × tax rate
Tax rate
The tax rate of the water resource tax is set by the provincial-level local governments based on the minimum average tax rate for each region that has been set out in the Annex to the Measures, taking into consideration the local water resources situation, economic and social development situation and water resource conservation.
According to the contents of the Annex, the minimum average tax rate of the water resource tax in Beijing is the highest (surface water: 1.6 yuan/m3, groundwater: 4 yuan/m3), and the minimum average tax rate of 13 regions such as Sichuan, Shanghai and Fujian is the lowest (surface water: 0.1 yuan/m3, groundwater: 0.2 yuan/m3). In addition, a higher tax rate can be set for enterprises with high water consumption to promote water conservation.
Entities eligible for tax exemptions/reductions
Water used for agricultural production and hydroelectric power plants are exempt from the water resource tax. In addition, to encourage businesses to improve their water use efficiency, the following tax reduction measures have been introduced for entities with high water use efficiency.
- Taxpayers whose industrial water use efficiency for the previous year have reached the advanced water use efficiency value set by the State will receive a 20% tax reduction. The lists of entities eligible for tax reductions will be published by the provincial water administration departments.
Obligations of taxpayers of the water resource tax
Taxpayers of the above-mentioned water resource tax must comply with the following obligations.
- Tax payment place: Taxpayers must pay the water resource tax to the tax authority at the place where the water is withdrawn.
- Deadline for payment: Payment must be made within 15 days from the end of the tax period (monthly, quarterly, or every time).
- Taxpayers must install water withdrawals measuring devices(instruments) that meet national metrology standards, and be responsible for the authenticity, accuracy, completeness and suitability of the water withdrawal data. In addition, taxpayers are required to submit water withdrawals measurement data to the water administration department through specified means when submitting water resource tax returns.
Effective date
The regulations will take effect on December 1,2024. At the same time, all related existing regulations, such as the “Interim measures for water resource tax reform polit”, will become invalid. Nine regions, including Hebei, Beijing and Henan, that had been conducting pilot projects will also have to follow the new measures.
The original text of the Measures can be downloaded from the following URL (in simplified Chinese).
https://www.mof.gov.cn/jrttts/202410/t20241016_3945718.htm
