China issues Environmental Protection Tax Law

Just days before the New Year, China’s National People’s Congress (NOC) standing committee passed the country’s first Environmental Protection Tax Law. The law will replace the existing pollutant discharge fee system with a pollution tax as the main economic tool regulating environmental pollution by businesses in China.

This historic development is expected to have a sweeping impact on enterprises’ compliance with environmental regulations. The law comes into effect on 1 January 2018. With the replacement of the existing discharge fee system with the environmental tax system, China’s regulation of environmental pollution by businesses is expected to be more efficacious. Loopholes that were exploited by local authorities and enterprises will disappear. Accordingly, the enterprises that directly discharge the taxable pollutants in China will be liable for new tax payments under the law. Enterprises are advised to plan ahead before the law comes into effect, ascertain the standard and amount of the tax payable in their location, and make changes as necessary.

HIGHLIGHTS OF THE LAW

The Environmental Protection Tax Law only targets the enterprises and other entities that directly emit a taxable pollutant. It does not tax those indirectly discharging pollutants.