(Approved by the State Council on January 13, 1990 promulgated by Decree No.3 of the Ministry of Finance on January 15, 1990)
Article 1
These Rules are formulated in order to promote the development of national economy, to expand international economic and technological cooperation, and to encourage the exploitation of China's onshore petroleum resources.
Article 2
All Chinese and foreign enterprises, which are engaged in the cooperative exploitation of onshore petroleum resources within the territory of the People's Republic of China shall pay royalties in accordance with these rules.
Article 3
Royalties shall be computed and imposed on the gross output of crude oil or natural gas produced every calendar year from each oil-and -gas field. The rates of the royalties are as follows:
1 Crude oil:
No payment of royalty is required for the portion of annual gross output of crude oil not exceeding 50,000 tons;
for the portion of annual gross output of crude oil from 50,000 to 100,000 tons, the rate shall be 1%;
for the portion of annual gross output of crude oil from 100,000 to 150,000 tons, the rate shall be 2%;
for the portion of annual gross output of crude oil from 150,000 to 200,000 tons, the rate shall be 3%;
for the portion of annual gross output of crude oil from 200,000 to 300,000 tons, the rate shall be 4%;
for the portion of annual gross output of crude oil from 300,000 to 500,000 tons, the rate shall be 6%;
for the portion of annual gross output of crude oil from 500,000 to 750,000 tons, the rate shall be 8%;
for the portion of annual gross output of crude oil from 750,000 to 1 million tons, the rate shall be 10%;
for the portion of annual gross output of crude oil exceeding 1 million tons, the rate shall be 12.5%.
2 Natural gas:
No payment of royalty is required for the portion of annual gross output of natural gas not exceeding 100 million standard cubic meters;
for the portion of annual gross out of natural gas from 100 million to 200 million standard cubic meters, the rate shall be 1%;
for the portion of annual gross output of natural gas from 200 million to 300 million standard cubic meters, the rate shall be 2%;
for the portion of annual gross output of natural gas from 300 million to 400 million standard cubic meters, the rate shall be 3%;
for the portion of annual gross output of natural gas from 400 million to 600 million standard cubic meters, the rate shall be 4%;
for the portion of annual gross output of natural gas from 600 million to 1 billion standard cubic meters , the rate shall be 6%;
for the portion of annual gross output of natural gas from 1 billion to 1.5 billion standard cubic meters, the rate shall be 8%;
for the portion of annual gross out put of natural gas from 1.5 billion to 2 billion standard cubic meters, the rate shall be 10%;
for the portion of annual gross output of natural gas exceeding 2 billion standard cubic meters, the rate shall be 12.5%.
Article 4
The Royalties for crude oil and natural gas shall be paid in kind.
Article 5
The Royalties for crude oil and natural gas shall be collected and administered by the tax authorities .
With respect to Chinese-foreign cooperative oil or gas fields, the production operators shall act as agents for withholding the royalties, and shall hand over the royalties withheld to the China National Petroleum Corporation, which, in turn, shall act as an agent for making the payment of the royalties.
Article 6
The royalties shall be computed annually and paid in advance in installments with each year; and the final settlement shall be made after the end of each tax year. The deadlines for advance payment and final settlement shall be set by the tax authorities.
Article 7
The oil or gas fields production operators shall, within 10 days after the end of each quarter, submit to the tax authorities a report on the output of oil or gas fields and any other related information required by the tax authorities.
Article 8
The withholding agents and paying agents of royalties must, in accordance with the time limits set by the tax authorities, pay the royalties. In case of failure to pay the royalties within the time limits, the tax authorities shall impose on them a surcharge for overdue payment at the rate of 1% of the overdue royalties for each day of delay, starting from the first day the payment becomes overdue.
Article 9
In case the oil or gas field production operators, in violation of the rules in Article 7, fail to submit the report on actual output and related information on time to the tax authorities, the tax authorities may impose on them a fine, in light of the circumstances, up to but not exceeding RMB 5,000 yuan; in dealing with those who misreport the actual output, the tax authorities, in addition to pursuing the royalties payment, may impose on them a fine, in light of the circumstances, up to but not exceeding five times the actual amount of royalties payable.
Article 10
The special terms, used in these Rules, are defined as follows:
(1) "Crude oil" refers to the solid and liquid hydrocarbon, in the natural state, as well as any liquid hydrocarbon extracted from natural gas, except for methane(CH4).
(2) "Natural gas" refers to the non-associated natural gas and associated natural gas, in the natural state.
"Non-associated natural gas" refers to all gaseous hydrocarbon extracted from gas deposits, including wet gas, dry gas, and residual gas remaining after liquid hydrocarbon has been extracted from wet gas.
"Associated natural gas" refers to all gaseous hydrocarbon extracted from oil deposits along with crude oil, including residual gas remaining after the liquid hydrocarbon.
(3) "Annual gross output of crude oil" refers to the total amount of crude oil produced by each oil or gas field in the same contracted area, in one calendar year, less the quantity of oil used for petroleum operations wasted.
(4) "Annual gross output of natural gas" refers to the total amount of natural gas produced by each oil or gas field in the same contracted area, in one calendar year, less the quantity of natural gas used for petroleum operations or wasted.
Article 11
The State Taxation Bureau shall be responsible for the interpretation of those Rules.
Article 12
These Rules shall become effective as of January 1, 1990.
