Shanghai Starts to Collect Regional Education Surcharge

After the Chinese government required all foreign-invested enterprises (FIEs) to pay the urban construction tax and education surcharge beginning in December last year, a recent circular issued by the Shanghai local government announced that starting this year, enterprises (including FIEs) are also obligated to pay the local educational surcharge in addition to the current nationwide education surcharge payment charged at the rate of 3 percent of a company’s tax turnover.

The Shanghai Municipal People’s Government promulgated the “Circular on the Local Education Surcharge Collection in Shanghai (hufafa [2011] No. 2)” on January 21, 2011. The Circular clarifies that in addition to paying the education surcharge in accordance with state regulations, all companies and individuals (including FIEs, wholly foreign-owned enterprises and foreign individuals) that are subject to payment of value-added tax, consumption tax, and business tax within Shanghai shall also pay the local education surcharge starting January 1, 2011.

Shanghai levies the local education surcharge at the rate of 2 percent based on a company or individual’s actual total payment of value-added tax, consumption tax and business tax.

The Circular authorizes the Shanghai local taxation bureaus to collect the local education surcharge and clarifies that tax certificates uniformly printed by tax authorities shall be used during the collection and payment of local education surcharge.

---