China Tax Alert: Energy & Natural Resources Focus - Issue 1, April 2013
Given the distinct nature of the oil and gas industry in China, special fiscal and tax policies have applied to foreign contractors over the years. An example of this is that foreign contractors are subject to Business Tax at the rate of three percent or five percent, based on the type of services provided. According to the Valued Added Tax (VAT) Law legislative plan, offshore oil exploitation and cooperative development of offshore oil and gas resources may hopefully be incorporated into the existing collection and management mechanism for the VAT general taxpayer during the process of legislation for VAT law. However, during the current transitional period, the question remains as to how to balance the indirect tax burden and mitigate the compliance risk for foreign contractors.