Ministry of Finance and State Administration Adjust Consumption Taxation Policy

Since Jan 1, 2009, the State Council, the Ministry of Finance, and State Administration of Taxation shall adjust the policies on the consumption tax of product oil as follows after the raising of the consumption tax rate of product oil:

I. the levying of consumption tax on imported naphtha shall be resumed since Jan 1, 2009.

II. Home-made naphtha as raw material of ethane and aromatic hydrocarbon products shall be exempt from consumption tax from Jan 1, 2009 to Dec 31, 2010. Consumption tax shall be levied on naphtha directly sold by enterprises not as raw material of ethane and aromatic hydrocarbon pursuant to regulations. The paid consumption tax on imported naphtha as raw material of ethane and aromatic hydrocarbon products shall be returned. The implementation rules shall be formulated separately by Ministry of Finance, together with General Administration of Customs and State Administration of Taxation. The ethylene products refer to ethylene, propylene, and butadiene. The aromatic hydrocarbon products refer to benzene, toluene, and xylene.

III. The levying of consumption tax on aviation kerosene shall be put off for the moment.

IV. The ethanol gasoline produced from taxed gasoline in outsourcing or consigned processing shall be exempt from tax. As to the ethanol gasoline produced from self-made gasoline, tax shall be paid in accordance with the gasoline consumed.

V. as to the gasoline and diesel collected from outsourcing or consignment processing used in the manufacture of methanol gasoline and bio-diesel, it is permitted to deduct the paid consumption tax from the tax payable.

VI. As to the naphtha, lubricating oil and raw material of fuel oil that enterprises stored before Dec 31, 2008, which were collected in outsourcing or consignment processing, it is permitted to deduct the tax paid in Dec, 2008 according to 0.2 CNY per liter for naphtha and lubricating oil and 0.1 CNY per liter for fuel oil.