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Transparency and Benefits in Parallel: the Urban Maintenance and Construction Tax Law is Effective from September 2021


In August 2020, the Urban Maintenance and Construction Tax Law (hereinafter referred to as “the Law") was adopted and published by the Standing Committee of the 13th National People's Congress of the People's Republic of China. The Law comes into force on 1 September 2021.


Under the new Law, the tax rates are summarized as follows:

Taxpayers who are located in​Applicable tax rate
urban areas​7 percent
a county or town​5 percent
​places other than a city, county or town​1 percent


While the three tax rates remain unaltered, several notable changes of the Law from the old regulations could be observed:

Introduction of the stipulations relating to the period-end uncredited VAT

This optimization allows that the amount of period-end uncredited VAT could be deducted from the taxation base of urban maintenance and construction tax, which will further reduce the burden on the taxpayers who are eligible for the refund of period-end uncredited VAT.

Clarifying that “the imported goods/services are not taxed"

The Law makes it clear that no urban maintenance and construction tax will be levied on the amount of VAT or consumption tax paid for imported goods, services or intangible assets which are provided by overseas entities or individuals to domestic customers.


Definition the tax obligation occurrence time

The obligation of the urban maintenance and construction tax occurs at the same time when the tax liability of VAT and consumption tax arises. The tax payment shall be made together with VAT and consumption tax at one time.

Our Observation

The enactment and implementation of the Urban Maintenance and Construction Tax relieves the tax burden on taxpayers. It is worth noting that with regard to the above mentioned second change, the latest Announcement [2021] No. 28 from the State Administration of Taxation clarifies that "the calculation base of education surcharge and local education surcharge shall be the same as the one of Urban Maintenance and Construction Tax." This means that from tax filing for September onwards, the relevant enterprises will be exempted from paying the urban maintenance and construction tax, while other additional taxes will also not be levied at the same time. In other words, the three additional taxes will no longer need to be withheld for common non-trade foreign exchange payments from 1 September.

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