“Urban Maintenance and Construction Tax Law of People’s Republic of China” has been passed on August 11, 2020 and will take effect on September 1, 2021. Prior to this, the urban maintenance and construction tax (hereinafter referred to as the urban construction tax) was stipulated in the “Provisional Regulations of the People's Republic of China on Urban Maintenance and Construction Tax” promulgated and revised by the State Council. After the implementation of the Urban Construction Tax Law takes effect, the provisional regulations shall be repealed at the same time. Compared with the provisional regulations, what changes are there in this legislation that deserve our attention? This article will interpret the urban construction tax law by way of comparison.

1. Taxpayers and Tax Base
   
   

   Tax Law	Provisional Regulations
   Article 1 All units and individuals who are taxpayers of consumption tax, value added tax shall be the taxpayers of urban maintenance and construction tax (hereinafter referred as taxpayers) and shall pay urban maintenance and construction tax according to these regulations. Article 2 The computation of urban maintenance and construction tax shall be based on the amount of consumption tax, value added tax actually paid by taxpayers. In accordance with the provision of the Value Added Tax, the refund of term-end excess input VAT credits shall be deducted from the tax basis of urban maintenance and construction tax.	Article 2 All units and individuals who are taxpayers of consumption tax, value added tax, and/or business tax shall be the taxpayers of urban maintenance and construction tax (hereinafter called Taxpayers) and shall pay urban maintenance and construction tax according to these regulations.
   Article 2 (Cont’d) The specific measures for determining the tax basis of urban maintenance and construction tax shall be submitted to the National People’s Congress Standing Committee for the record by the State Council in accordance with this Law and relevant tax laws and administrative regulations. Article 3 No urban maintenance and construction tax shall be collected on the amount of value added tax and consumption tax paid by imported goods or overseas units and individuals to sell labor services, services, and intangible assets in China.	Article 3 The computation of urban maintenance and construction tax shall be based on the amount of consumption tax, value added tax and/or business tax actually paid by taxpayers, and the tax shall be paid together with the payment of consumption tax, value added tax and/or business tax.

   
   

   (1)	Taxpayers Starting from May 1, 2016, China has replaced all business tax with value added tax. The taxpayers stipulated by the Urban Maintenance and Construction Tax Law are units and individuals who pay value-added tax and consumption tax in China, and business tax is no longer included.
   (2)	Tax Basis First of all, the calculation of tax basis also not apply the regulations related to business tax. In addition, urban construction law adds the relevant provisions concerning the urban construction tax for the VAT credit refund, which stipulates that the tax basis of the urban construction tax is the amount after deducting the refund of term-end excess input VAT credits.

   
   
2. Tax Rates
   
   

   Tax Law

   Provisional Regulations

   Article 4 The urban maintenance and construction tax rates depending on the taxpayer’s location, are: 7% for a taxpayer in city 5% for a taxpayer in a country town or town 1% for a taxpayer in a place other than a city, country town or town The taxpayer’s location mentioned in the preceding paragraph refers to the taxpayer’s domicile or other location related to the taxpayer’s business activities. The specific location shall be determined by the province, autonomous region, or municipality directly under the Central Government.

   Article 4 The urban maintenance and construction tax rates depending on the taxpayer’s location are: 7% for a taxpayer in city, 5% for a taxpayer in a country town or town, and 1% for a taxpayer in a place other than a city, country town or town.

   
   In order not to increase the tax burden of taxpayers, the urban construction tax law has kept the current tax rate regulations. The urban construction tax law does not make uniform provisions on taxpayer’s location, and provinces, autonomous regions, and municipalities have been authorized to make specific determinations, as the urban construction tax is a local tax.
   
   
3. Tax Payable, Reduction and Exemption
   
   

   Tax LawTax LawTax Law

   Article 5 The urban maintenance and construction tax is calculated by multiplying the tax basis by the specific applicable tax rate. Article 6 According to the needs of the national economy and social development, the State Council may provide the reduction or exemption of urban maintenance and construction tax for major public infrastructure construction, special industries and groups, and serious emergencies, and submit to the National People’s Congress Standing Committee for the record.

   
   The tax payable shall be calculated according to the tax calculation basis stipulated in Article 2 multiplied by the tax rate stipulated in Article 4 of the urban construction tax law. The State Council may stipulate reduction or exemption according to special circumstances, and it shall be reported to the National People’s Congress Standing Committee for the record.
   
   
4. Tax Obligation Term and Withholding Agent
   
   

   Tax Law

   Provisional Regulations

   Article 6 According to the needs of the national economy and social development, the State Council may provide the reduction or exemption of urban maintenance and construction tax for major public infrastructure construction, special industries and groups, and serious emergencies, and submit to the National People’s Congress Standing Committee for the record. Article 7 The urban maintenance and construction tax obligation term is same with value added tax and consumption tax, shall be paid together with value added tax and  consumption tax.

   Article 5 The collection, management, rewards and punishments issues of urban maintenance and construction tax shall be handled in accordance with the relevant regulations on consumption tax, value-added tax and business tax

   
   In order to standardize the collection and management of urban construction tax, the urban construction tax law clearly stipulates the tax obligation term of urban construction tax, the withholding agent, and the time when the withholding obligation occurs. The withholding agent of value added tax and consumption tax needs to withhold the urban construction tax together.
   
   
5. Tax Administration
   
   

   Tax Law	Provisional Regulations
   Article 9 The urban maintenance and construction tax shall be collected and managed by the tax authorities in accordance with this Law and the "Tax Collection and Administration Law of the People's Republic of China".	Article 6 The urban maintenance and construction tax shall be used for the maintenance and construction of urban public utilities and public facilities, and the specific arrangements shall be determined by the local people's government. Article 7 The taxes paid in accordance with the Article 4, paragraph 3 of these Regulations shall be used exclusively for the maintenance and construction of towns and villages.
   Article 10 Taxpayers, tax authorities and their staff who violate the provisions of this Law shall be investigated for legal responsibility in accordance with the “Tax Collection Administration Law of the People's Republic of China” and relevant laws and regulations.	Article 8 After the city maintenance and construction tax is levied, any departments or governments are not allowed to apportion funds or materials to taxpayers. The taxpayer has the right to refuse apportionment in any form. Article 9 The governments of provinces, autonomous regions, and municipalities directly under the Central Government may, in accordance with these regulations, formulate implementation rules and submit them to the Ministry of Finance for the record

   
   The special purpose of urban construction tax is no longer specified by the urban construction tax law. The collection of urban construction tax shall be managed in a unified manner in accordance with the provisions of this Law and the “Tax Collection Administration Law of the People's Republic of China”.
   
   
6. Implementation
   
   

   Tax Law	Provisional Regulations
   Article 11 This Law shall come into force on September 1, 2021. The "Interim Regulations of the People's Republic of China on Urban Maintenance and Construction Tax" promulgated by the State Council on February 8, 1985 shall be repealed simultaneously.	Article 10 The regulations came into force in 1985.

   
   The Urban Maintenance and Construction Tax Law will come into force on September 1, 2021. Before that, the urban construction tax will still be collected and managed in accordance with the provisional regulations. After the implementation of the urban construction tax law, the provisional regulations shall be repealed.