In recent years, with the increase in BT (build-transfer) projects in the infrastructure sector, the issue of the levy of business tax on such projects has progressively become more prominent. There are no uniform rules for the levy of taxes on BT projects at the national level. In practice, policies at the local level on the levy of business tax on BT projects are an unmitigated mess.
Tax on BT projects
Pursuant to the Provisional Regulations for Business Tax and the Implementing Rules for the Provisional Regulations for Business Tax, payers of business tax are entities and individuals that provide the services specified in the regulations, transfer intangible assets and sell immovable assets. The tax basis for business tax is the entire price and extra-price fees charged by the taxpayer for the provision of taxable services, transfer of intangible assets, or sale of immovable assets. The business tax rate on the construction industry is 3%, and on the service industry 5%.
The BT concession model is one where a government, or an entity authorised by it, selects through the statutory procedure an investor for an infrastructure project. The investor is responsible for raising the project construction funds and for constructing the project, and once construction is completed, the government buys back the project by paying the buyback moneys. The BT model is an infrastructure construction model that combines financing and construction together. However, based on the above-mentioned business tax regulations, it is impossible to determine how business tax is to be paid on a BT project.
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