30 Agricultural Specialties Tax

TAX REFORM

TAX PROVISIONS WHILE STILL IN FORCE/PRE-REFORM TAX PROVISIONS

This tax (called Agriculture Tax on Agricultural Specialties in full) is basically an extension of Agriculture Tax (see Chapter 29). It is imposed on income from agricultural specialties in order to regulate production income in the agricultural, forestry, animal husbandry, and fishing and fishery industries. The Rules of the State Council on Levying Agriculture Tax on Agricultural Specialties currently in force were promulgated and implemented by the State Council on January 30, 1994, and came into effect on the same date.

Agricultural Specialties Tax is administered and collected by the local financial departments and the local tax bureaus. The revenue collected belongs to the local governments. In 2003, revenue from Agricultural Specialties Tax amounted to 8.92 billion yuan, accounting for only 0.4% of the country's total tax revenue.

TAX REFORM

Since the countryside tax and fee reform experiments began in 2000, the Ministry of Finance and the State Administration of Taxation (SAT), with the approval of the State Council, have issued notices to gradually reduce tax rates and narrow the scope of taxable items for this tax.

After approval was granted at the Second Meeting of the 10th National People's Congress (NPC), the tax was abolished for all agricultural products except for tobacco products, effective from 2004.

The provisions discussed below apply only to tobacco products now, but the tax computation methods remain the same, as does the applicable tax rate for tobacco products of 20%.

TAX PROVISIONS WHILE STILL IN FORCE/PRE-REFORM TAX PROVISIONS

Taxpayers

Under State Council rules, any of the following entities that are engaged in the production of specified agricultural specialties within the territory of China, may be subject to tax:

• Collective economic organizations and cooperative economic organizations.
• Administrative units, non-profit institutions, military units, social organizations, and other units.
• Enterprises.
• Temples.
• Business contractors and other individuals.

  Units and individuals that purchase specified agricultural specialties may also be subject to tax.

Tax Base and Scope

What Constitutes Taxable Income

The following forms of income constitute taxable income:

• Income from tobacco.
• Income from horticulture.
• Income from aquatic industries.
• Income from forestry.
• Income from animal husbandry.
• Income from edible fungi.
• Income from valuable foodstuffs.
• Income from other agricultural specialties as specified by the People's Governments at the provincial level.

  Tax payable is based on the actual income earned from specified agricultural specialties.

What Constitutes Taxable Items

The State Council has classified taxable items for certain specified agricultural specialties under seven main categories, which are taxed at specified rates that are applicable nationwide.

Taxable items for other specified agricultural specialties shall be stipulated by the People's Government at the provincial level after considering the profit margins achievable for different products.

Tax Rates

For the seven main categories of taxable items identified by the State Council, applicable tax rates range from 8% to 31%.

Tax rates for other specified agricultural specialties shall be stipulated by the People's Government at the provincial level after considering the profit margins achievable for different products. The tax rate shall be within a range from 5% to 20%.

Computation Methods

Tax payable is computed based on the actual value of purchases of taxable items, and on the applicable tax rate of 20%.

In general, the following formula is used to compute tax payable:

Tax payable = Purchase value × Applicable tax rate

Example

A cigarette factory purchased a batch of tobacco from tobacco planters for a value of 1 million yuan. The applicable tax rate is 20%.

Tax payable = 1 million yuan × 20% = 0.2 million yuan

Liability

Tax liability arises on the date that the specified agricultural products are purchased.

Places for Payment

Payment should be made to the tax collection departments in the locale where the purchases were made.

Places for Payment

Taxpayers should report and pay tax to the local tax collection authorities within 30 days of the date that tax liability arises (i.e., the date that the purchases are made).

Local Surtax

Surtax payable should not exceed 20% of the tax payable.

For the experimental areas, whether to levy surtax and which surtax rates should be applied, shall be decided by the People's Government at the provincial level, after considering local conditions.