Beginning December 1, 2010, foreign-invested enterprises, foreign enterprises, and foreign individuals are now required to pay the city maintenance and construction tax as well as the education surcharge, from which these entities and individuals were formerly exempt. Prior to this regulation, the PRC levied those taxes only on Chinese-owned and funded enterprises and Chinese citizens.

Neither of the two taxes applies to dividends. The city maintenance and construction tax is levied on transactions that are subject to the value-added tax (“VAT”), the business tax, and the consumption tax. The sum of the amount paid for each of these three taxes, if applicable, also serves as the tax base. In urban districts of cities, the tax rate is seven percent (7%) of that tax base, while it is five percent (5%) for taxpayers in towns, and one percent (1%) in all other areas. Similarly, the education surcharge is levied on transactions subject to the VAT, the business tax, and the consumption tax. The tax rate is three percent (3%) of the amount paid for those three taxes.