China’s SAT Clarifies Tax Treatment towards Mining Services

When a taxpayer exploits mineral resources for other entities or individuals, the various services it provides can be subject to different types of taxes, according to a recent announcement by the State Administration of Taxation (SAT).

The “Announcement on Tax Issues Concerning Mineral Resource Exploitation Services Taxpayers Provide for Other Entities and Individuals (SAT Announcement [2011] No.56)” clarifies that the following taxable services a taxpayer provides shall be subject to business tax:

• Mine blasting and perforation
• Surface mining
• Building of shafts and tunnels

The announcement also specified that taxable services more related to goods supply – such as the exploitation, excavation, cutting, crushing, sorting and washing of mineral resources – shall be subject to value-added tax.

Announcement No.56 will take effect on December 1, 2011, and the unsettled taxation issues before the date shall also be handled in accordance with the new regulations.

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