Law of the People's Republic of China on Vessel Tonnage Tax

Order of the President of the People's Republic of China No.85

December 27, 2017

The Law of the People's Republic of China on Vessel Tonnage Tax was adopted at the 31st session of the 12th Standing Committee of the National People's Congress on December 27, 2017 and is hereby issued with effect from July 1, 2018.

Xi Jinping, President of the People's Republic of China

Law of the People's Republic of China on Vessel Tonnage Tax

(Adopted at the 31st session of the 12th Standing Committee of the National People's Congress on December 27, 2017)

Article 1 Any vessel entering a domestic port of the People's Republic of China from an overseas port ((hereafter referred to as "Taxable Vessel") shall be subject to vessel tonnage tax (hereinafter referred to as "Tonnage Tax") in accordance with this Law.

Article 2 The taxable items and rates of Tonnage Tax shall be subject to the Table of Taxable Items and Rates of Tonnage Tax attached hereto (the "Table").

Article 3 The rates of Tonnage Tax are classified into preferential rates and general rates.
The preferential rates of Tonnage Tax shall apply to Taxable Vessels of the nationality of the People's Republic of China or of the nationality of any other country that has entered into an agreement or treaty with the People's Republic of China with a mutually-offered most-favored-nation treatment provision on vessel taxes.
The general rates of Tonnage Tax shall apply to any other Taxable Vessels.

Article 4 Tonnage Tax shall be collected on the basis of net tonnage and the validity term of Tonnage Tax Certificate.
When making a tax declaration each time, the responsible person for a Taxable Vessel may apply for, and be issued, a Tonnage Tax Certificate with a certain validity term on the basis of the Table.

Article 5 The taxable amount of Tonnage Tax shall be the product of net tonnage multiplied by the applicable tax rate.

Article 6 Tonnage Tax shall be collected by the customs authorities (hereinafter referred to collectively as the "Customs Authority"). The Customs Authority shall issue payment receipts for Tonnage Tax.
The Customs Authority shall issue a tonnage tax certificate (hereinafter referred to as "Tonnage Tax Certificate") to a Taxable Vessel with a validity term as applied by the responsible person for the vessel upon payment of Tonnage Tax or upon provision of security for the payment by such person.

Article 7 When being processed for entry into the territory at a port of entry, a Taxable Vessel shall make a tax declaration to the Customs Authority and apply for a Tonnage Tax Certificate or produce its existing Tonnage Tax Certificate to be verified (or apply for verification of its electronic Tonnage Tax Certificate). When being processed for exit from the territory at a port of exit, a Taxable Vessel shall produce its Tonnage Tax Certificate in order to be verified.
To apply for a Tonnage Tax Certificate, the responsible person for a Taxable Vessel shall submit to the Customs Authority the following documentation:
1. The nationality certificate of the Taxable Vessel, or the certification for the retaining of such certificate issued by a competent maritime authority; and
2. The tonnage certificate of the Taxable Vessel.
Where a Taxable Vessel berths in a non-customs location due to force majeure, the responsible person for the Taxable Vessel shall immediately report the case to a nearby Customs Authority and shall make a tax declaration to the Customs Authority pursuant to this Law upon the removal of the force majeure event.

Article 8 The obligation of a Taxable Vessel to pay Tonnage Tax arises on the date of its entry into the territory at a port of entry
Where a Taxable Vessel is not to exit after the expiration of its Tonnage Tax Certificate, the responsible person for the Taxable Vessel shall apply for a new Tonnage Tax Certificate and pay Tonnage Tax from the date immediately following the date of expiration of the previous certificate.

Article 9 The following vessels shall be exempted from Tonnage Tax:
1. Vessels on which the taxable amount of Tonnage Tax is below CNY50;
2. Unloaded vessels of which the ownership is obtained abroad by means of purchase, receipt of a donation or inheritance and which enters the territory for the first time;
3. Vessels that do not load or unload goods and passengers within the 24 hours after the expiration of their Tonnage Tax Certificates;
4. Unpowered vessels (excluding unpowered barges);
5. Fishery vessels for fishing or aquaculture;
6. Vessels taking refuge, under anti-epidemic quarantine or repair, having ceased business operations or being dismantled that do not load or unload goods and passengers;
7. Vessels owned or requisitioned by armed forces or armed police;
8. Police vessels;
9. Vessels used by foreign embassies or consulates in China, representative offices of international organizations in China and employees thereof which shall be exempted from Tonnage Tax under the relevant laws; and
10. Other vessels specified by the State Council.
Exemptions provided for under the preceding Item 10 shall be filed by the State Council for the record with the NPC Standing Committee.

Article 10 For a Taxable Vessel under any of the following circumstances during the term of its Tonnage Tax Certificate, the Customs Authority shall approve the extension of the term of its Tonnage Tax Certificate by the actual duration of the circumstance:
1. The Taxable Vessel is taking refuge or under anti-epidemic quarantine or under repair or renovation which does not load or unload goods and passengers; or
2. The Taxable Vessel is requisitioned by the armed forces or armed police.

Article 11 A vessel meeting any of the requirements stated in Items 5 to 9 in the first paragraph of Article 9 or Article 10 of this Law shall apply for tax exemption or an extension of its Tonnage Tax Certificate by stating its basis and reason for such application and providing legally valid documentation of proof or an owner-user relationship certificate issued by the relevant authorities or organizations such as the maritime, fishery vessel administration, or entry-exit quarantine and inspection authorities.

Article 12 The responsible person for a Taxable Vessel shall pay Tonnage Tax within 15 days upon the issuance of a Tonnage Tax payment receipt for the vessel by the Customs Authority. In the event of late payment of the Tonnage Tax, an overdue fine shall be charged at the rate of 0.5‰ of the overdue and unpaid amount for each overdue day until the payment is made in full.

Article 13 For a Taxable Vessel to make a tax declaration and complete the entry-exit procedures before arriving at a port of entry as approved by the Customs Authority, the responsible person for the vessel shall provide the Customs Authority with security equivalent to the vessel's legal Tonnage Tax payment obligation, and shall declare and pay the Tonnage Tax to the Customs Authority in accordance with this Law upon arrival at the port of entry.
The following properties and rights may be used as security:
1. RMB and other convertible currencies;
2. Drafts, promissory notes, checks, bonds, and deposit receipt;
3. Letters of guarantee issued by banks or nonbanking financial institutions; and
4. Other properties and rights legally recognized by the Customs Authority.

Article 14 Where the net tonnage of a Taxable Vessel changes during the term of its Tonnage Tax Certificate due to repair or renovation, the Tonnage Tax Certificate shall remain valid, and the responsible person for the vessel shall provide documentation proving the repair or renovation of the vessel when the vessel is being processed for exit or entry.

Article 15 Where the taxable items or tax rates applicable to a Taxable Vessel change during the term of its Tonnage Tax Certificate due to the adjustment of taxable items or rates or change of the nationality of the vessel, the Tonnage Tax Certificate shall remain valid.
In the event of a change in tax rate due to a change of nationality, the responsible person for the Taxable Vessel shall provide documentation proving the change of nationality of the vessel when the vessel is being processed for entry or exit.

Article 16 For a Tonnage Tax Certificate that is destroyed or lost before it expires, a written application shall be made to the issuing Customs Authority of the original certificate for issuance of a duplicate of the original Tonnage Tax Certificate, with no additional payment of Tonnage Tax required.

Article 17 Where the Customs Authority discovers that it has taxed short of what is required or has omitted to tax a Taxable Vessel, it shall recover the amount of shortage or original amount payable from the Taxable Vessel within one year from the date when such amount was originally due to be paid, but if such shortage or omission is caused by any illegality on the part of the Taxable Vessel, the Customs Authority may recover the amount of shortage or original amount payable in relation to the vessel within three years of the date when such amount was originally due to be paid, and additionally charge the vessel an overdue fine at a rate of 0.5‰ of the amount of shortage or original amount payable for each overdue date from the original due date.
Where an overpayment of tax on a Taxable Vessel is discovered by the Customs Authority, it shall notify the vessel within 24 hours for the processing of tax refund along with interest calculated based on the interest rate on demand deposits of the corresponding period.
Where the discovery of an overpayment of tax is made on the part of a Taxable Vessel, a written request may be made, within three years of the date when the original payment was made, to the Customs Authority for refunding the overpaid amount along with interest calculated based on the interest rate on demand deposits of the corresponding period; and the Customs Authority shall verify the case and notify the vessel of the processing of tax refund within 30 days of the date of accepting the request.
A Taxable Vessel that is notified under the second or third paragraph of this Article shall go through the relevant tax refund procedures within three months of the date of notification.

Article 18 For any of the following acts by a Taxable Vessel, the Customs Authority shall order it to make a correction within a time limit and impose a fine of CNY2,000 up to CNY30,000 on it; for any failure to pay or underpayment of Tonnage Tax, a Taxable Vessel shall be subject to a fine of not less than 50% of, but not more than five times the tax amount due or underpaid, or CNY2,000 if such amount is below CNY2,000:
1. The Taxable Vessel fails to declare Tonnage Tax or apply for a Tonnage Tax Certificate in accordance with the relevant provisions; or
2. The Taxable Vessel fails to submit its Tonnage Tax Certificate for verification (or apply for verification of its electronic Tonnage Tax Certificate) or to provide any other certificates in accordance with the relevant provisions.

Article 19 Tonnage Tax, overdue fines, and fines shall be calculated in RMB.

Article 20 Where there is in the collection of Tonnage Tax not covered by this Law, the laws and administrative regulations on the administration of tax collection shall apply.

Article 21 The following terms as used in this Law and the Table attached hereto shall be defined as follows:
Net tonnage refers to the net tonnage as stated on the vessel tonnage certificate issued by the government of the country or region of nationality of a Taxable Vessel;
Unpowered vessels refer to vessels without any kind of motor but propelled passively by external force drives;
Unpowered barges refer to unpowered vessels that have been registered as barges with the fishery vessel administration authorities;
Fishery vessels for fishing or aquaculture refer to vessels that have been registered as fishing vessels or aquaculture vessels with the fishery vessel administration authorities of the People's Republic of China;
Tugboats refer to special-operation vessels specially used for pushing or tugging transportation vessels.
Term of the Tonnage Tax Certificate refers to a period of time calculated on the basis of calendar year and day.

Article 22 This Law shall come into force as of July 1, 2018, and the Interim Regulations of the People's Republic of China on Vessel Tonnage Tax issued by the State Council on December 5, 2011 shall be abolished at the same time.