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Home > Tax & Taxation
How is environmental protection tax collected in China?

The Environmental Protection Tax Law (hereinafter referred to as “the Law”) became effective on January 1, 2018, and is applicable to all enterprises which discharge pollutants (air emissions, wastewater, solid wastes, and noise) to the environment. The pollution discharge fees system will be replaced by the environmental protection tax system after the Law becomes effective.


The Law mainly consists of calculations on four categories: air emissions, wastewater, solid wastes and noise. Detailed calculation measures are listed below:


    A.     Calculation of Environmental Protection Tax for Air Emissions

    1.     Tax amount for pollutant = 1.2 (RMB) * pollutant discharge amount (kg) / unit pollutant equivalent amount value (kg);

    2.     Unit pollutant equivalent amount (air emissions) is determined by the Tables attached with the Law, which also lists the taxable pollutants;

    3.     Rank the taxable pollutants from each discharge outlet by unit pollutant equivalent amount, and the top three pollutants shall be levied environmental protection tax.

    B.     Calculation of Environmental Protection Tax for Wastewater Discharge

    1.     Tax amount for pollutant = 1.4 (RMB) * pollutant discharge amount (kg) / unit pollutant equivalent amount (kg);

    2.     Unit pollutant equivalent amount (water pollutants) is determined in the Tables attached with the Law, which also lists the taxable pollutants;

    3.     Divide the taxable pollutants into heavy metal pollutants and other pollutants. Rank the taxable pollutants from each discharge outlet by unit pollutant equivalent amount, and the top five heavy metal pollutants and top three other pollutants shall be levied environmental protection tax.

    C.    Calculation of Environmental Protection Tax for Solid Wastes

    1.     Tax amount = applicable unit tax amount (RMB/ton) * solid wastes disposal amount (ton);

    2.     Applicable tax amount is determined by the Tables attached with the Law.

    D.    Calculation of Environmental Protection Tax for Noise

    1.     Tax amount of construction noise = 3 (RMB/m2) * building area (m2)

    2.     Tax amount of boundary noise is determined by the decibels (dBs) exceeding the regulatory limits, which is shown in the Tables attached with the Law.

According to the Law, pollutant discharge amount (wastewater and air emissions), solid wastes disposal amount or boundary noise level is determined by the monitoring data from qualified online monitoring devices or qualified monitoring institutions. If the aforementioned determination methods are not able to be applied, calculation methods (material balance or sampling) as determined by administrative department of environmental protection are applicable.


The main difference between the pollution discharge fees system and the environmental protection tax system is that the tax amount will be influenced by the environmental performance of a taxable enterprise. The main factors which determine an enterprise’s pollution discharge expenditure (increase/remain the same/decrease) are as follows:


    A.     In the following cases, pollution discharge expenditure might increase after the implementation of the Law.

                1.     Enterprises which directly discharge pollutants and which do not hand over pollution discharge fees under current supervision system regularly.

                2.     Enterprises which have handed over pollution discharge fees but which do not carry out the pollution discharge fees declaration appropriately. For instance, the variety or quality of its declared pollution discharge is lower than the actual situation.

    B.     In the following cases, pollution discharge expenditure might decrease after the implementation of the Law.

                1.     Enterprises equipped with a suitable treatment system which decreases the pollutant to lower than 30%/50% of the corresponding regulatory limits.

    C.    The impact of the following factors on pollution discharge expenditure are not yet certain and are to be noted along with its progress of implementation:

                1.     The Law grants local people's governments of provinces, autonomous regions and municipalities the right to determine and adjust the specific tax amounts applicable to taxable air pollutants and water pollutants, by which the local environmental protection tax amount is anticipated to vary per regional environmental condition.

                2.     It remains to be seen if the methods employed to compute the taxable pollutant amount (such as the monitoring of data reading frequency, the balancing of calculation principles in relation to the applicability of materials) are sound and complete.

                3.     The Law does not cover environmental tax associated with VOCs discharge, which is included in the pollution discharge fees system.

Given the fact that this tax category has been transformed from the pollution discharge fees system with its fee calculation framework adopted to the tax accounting, and the fact the pollution discharge fee consists of a very low proportion of tax liability to enterprises, any impact of this tax reform in the short term is anticipated to be low.


However, the environmental protection tax is mainly aimed at facilitating environmental pollution reduction via economic leverage. The tax amount for enterprises of different pollution severity is anticipated to be differentiated in the long term to motivate environmental protection facility installation by the enterprises for cost-benefit reasons, and to accelerate the elimination of severe or excessive pollution enterprises.


Along with the environmental protection tax law becoming effective, it is anticipated that the accuracy and validity of calculation and enterprise declaration on pollutant discharge will be strengthened.  Meanwhile, the discretion of local government for varying the unit tax amount, and the unspecified methods of accounting for different industries or different pollutants are to be noted by any related enterprise. 



* The authors are from Golder Associates.  Golder Associates is an employee-owned international engineering and environmental consultant with more than 7,000 staff located in more than 170 offices worldwide. The Group provides specialist consulting services in environmental science and engineering including Environmental Due Diligence (EDD), Phase I and II Environmental Site Assessments (ESA), EHS audits, Environmental Impact Assessments (EIA), Environmental Management Plans (EMP), EHS training, and the design and implementation of environmental remediation plans. We have highly experienced environmental engineers and scientists with worldwide project experience, and have been actively working for a large number of multinational companies in Asia and internationally for many years. In China, Golder Associates has offices in Shanghai, Beijing, Hong Kong and Taiwan and employs more than 70 EHS consultants with rich experiences in Chinese projects. Its offices in Shanghai and Hong Kong have operated for over 12 years.


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