China Extends Tax Break for Rerefined Oils


China Extends Tax Break for Rerefined Oils
An auto mechanic loosens a vehicle's oil drain plug to allow used engine oil to flow out into a waste oil collection container. © Setta Sornnoi

China’s government announced last month a four-year extension of a consumption tax exemption for petroleum products made from recycled waste mineral oil – including rerefined base oils.

The Ministry of Finance on Sept. 27 said the exemption has been extended to Dec. 31, 2027, saying it aims to continue supporting the comprehensive utilization of resources and environmental protection in China.

According to the ministry, the consumption tax is calculated and paid based on the balance of the quantity of finished lubricants sold in the current period, minus the quantity of base oil consumed that complies with the announcement’s provisions – meaning base oil produced from rerefining waste mineral oil.

Rerefined base oils qualify for the exemption if they come from a rerefinery that produces 0.65 tons of base oil for every ton of waste lubricants fed into the front of the plant. Operators must use base oil produced from rerefined waste mineral oil to produce finished lubricants or supply them to lubricant manufacturers.

Products produced using recycled waste mineral and products using other raw materials should be accounted for separately, the agency said.

The ministry noted that If it is verified that a taxpayer has committed fraud to enjoy the consumption tax exemption policy stipulated in this announcement, the tax authorities will recover the tax exemptions that he or she has previously defrauded, and will cancel the exemption from the tax exemption provided for in the announcement. That starts from the year in which the taxpayer committed the violations. After that, in terms of eligibility for the consumption tax policy, taxpayers are not allowed to apply again within three years.

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