On October 18, 2010, the State Council issued the Notice on Unification of City Maintenance and Construction Tax and Education Surcharge for Domestic Enterprises, Foreign Invested Enterprises, and Foreign Individuals, Guo Fa (2010) No. 35. On and after December 1, 2010, City Maintenance and Construction Tax and Education Surcharge will apply to foreign enterprises, foreign invested enterprises, and foreign individuals.

In China, City Maintenance and Construction Tax is levied on transactions subject to VAT, Business Tax, and Consumption Tax. The tax base is the amount of VAT, Business Tax, and Consumption Tax paid. Tax rates are 7% for taxpayers in urban districts of cities, 5% for taxpayers in towns, and 1% for taxpayers in other areas. Similar to City Maintenance and Construction Tax, Education Surcharge is also levied on transactions subject to VAT, Business Tax, and Consumption Tax. The tax rate is 3% of the amount of VAT, Business Tax, and Consumption Tax paid. Currently, foreign enterprises, foreign invested enterprises, and foreign individuals are exempt from City Maintenance Tax and Education Surcharge; such taxes only apply to domestic enterprises and Chinese nationals. This is soon to change, however.

VAT payers who pay VAT at the regular rate of 17% of the sales price will need to pay an additional 1.7% of the sales price as City Maintenance and Construction Tax and Education Surcharge on or after December 1, 2010. This 1.7% tax is not recoverable, although it can be deducted when computing Corporate Income Tax. Business Tax payers who pay Business Tax at 5% of the gross service fee will need to pay additional 0.5% of gross service fee as City Maintenance and Construction Tax and Education Surcharge on or after December 1, 2010.

Source: http://www.gov.cn/zwgk/2010-10/21/content_1727094.htm