On December 9, 2008, the Ministry of Finance (MOF) and the State Administration for Taxation (SAT) jointly promulgated the Circular on Value-Added Tax Policies for Comprehensive-Utilizationof- Resources Products and Other Products, Cai Shui [2008] 156, the Circular).  

Under the Circular, the sale of the following self-manufactured goods (subject to certain prescribed specifications) is exempted from VAT:

  1. Recycled water;
  2. Rubber powder made from 100 percent worn-out tires;  
  3. Retreaded tires (if the tire core is 100 percent made from worn-out tires); and  
  4. Certain building materials made from raw materials of which at least 30 percent comes from waste residue.  

The Circular also grants a VAT exemption to wastewater treatment services. These provisions came into effect on January 1, 2009. The provisions addressed in the following three paragraphs, however, have been effective since July 1, 2008.  

The sale of the following self-manufactured goods (subject to certain prescribed specifications) enjoys the preferential VAT policy of “refund-upon-collection”:  

  1. High purity carbon dioxide products made from industrial waste gas;
  2. Electric power or heat generated by burning trash such as urban household waste, straw, bark residue, mud and medical waste (if no less than 80 percent of the fuel is trash);
  3. Shale oil made from the oil shale discarded in the process of coal mining;  
  4. Reclaimed asphalt made from waste asphalt (provided that no less than 30 percent of the raw materials is waste asphalt); and  
  5. Cement (including cement clinker) made from raw materials, of which no less than 30 percent is rotary kiln waste.  

In addition, the sale of the following self-manufactured goods (subject to certain prescribed specifications) enjoys the preferential VAT policy of “50 percent-refund-upon-collection”:

  1. Nitrocellulose powder for paint made from retired military propellant (if no less than 90 percent of the raw materials is old military propellant );
  2. By-products of desulfurizing flue gas and high-sulfur natural gas generated by coal-fired power plants and various industrial enterprises;  
  3. Steam, active carbon, silica white, lactic acid, calcium lactate and marsh gas made from discarded wine lees and spent wash;  
  4. Electric power and heat generated from gangues, silt coal, stone coal and oil shale (if no less than 60 percent of the fuel used to generate such power is gangues, silt coal, stone coal and oil shale);  
  5. Electricity generated from wind power; and  
  6. Certain new wall materials listed in the catalogue attached to the Circular.  

The Circular also provides that the sale of self-manufactured bio-diesel that comprehensively utilizes resources enjoys the preferential VAT policy of “first-levy-then-refund.” The Circular defines such bio-diesel as the diesel made from discarded vegetable oil and animal fats, and no less than 70 percent of the raw materials come from discarded vegetable oil or animal fats.  

Most preferential VAT treatments granted by the Circular are not automatically applied to qualified VAT taxpayers. Rather, VAT taxpayers of comprehensive-utilization-of-resources products (except for wastewater treatment services, wind power projects and new wall materials) must apply for and obtain a Certificate of Comprehensive-Utilization-of-Resources. Otherwise, they will not be entitled to the Circular’s preferential VAT treatments.  

This Circular supersedes nine circulars issued by MOF and/or SAT relating to VAT policies on various products that comprehensively utilize resources through 1995 to 2008.