China to Phase Out Decades-Old Land Tax Exemptions for Energy Sector

China’s Ministry of Finance and State Taxation Administration announced a policy shift ending nearly 40 years of broad urban land use tax exemptions for primary production facilities in the energy, mining, and resource sectors. Starting September 1, 2026, enterprises will pay 50% of standard land use taxes on reinstated operational plots during a one-year transition period before full taxation begins on September 1, 2027. Exemptions will be strictly limited to public welfare, safety buffer zones, and major infrastructure.

The policy shift signals a significant structural tax adjustment for China's capital-intensive energy and extractive sectors. By transitioning away from blanket land-tax relief toward targeted infrastructure exemptions, China aims to disincentivize land hoarding, boost local tax administration consistency, and lower tax distortions across state and non-state energy producers.

China’s Ministry of Finance and the State Taxation Administration issued a joint announcement on July 28, 2026, overhauling urban land use tax policies for state-heavy energy and resource sectors [claim-1]. The adjustment cancels long-standing land tax exemptions on primary production and operational sites across the coal, mining, oil and gas, building materials, and power generation industries [claim-2]. To cushion the financial impact on heavy industries, regulators established a two-stage transition schedule [claim-4]. For operational land where taxation is being restored, enterprises will pay a reduced tax rate of 50 percent of the standard urban land use tax obligation from September 1, 2026, through August 31, 2027 [claim-4]. Full taxation will take effect on September 1, 2027, coinciding with the formal repeal of legacy rules such as the 1989 power sector tax regulations [claim-4]. Under the new procedures, corporate taxpayers must submit exemption filings while retaining land title certificates, temporary land approvals, and project planning records for future compliance audits [claim-1]. Despite ending broad exemptions for core industrial plants, the updated policy maintains targeted tax exemptions for safety-critical, environmental, and public infrastructure land [claim-3]. Exempt categories include long-distance oil and gas pipeline corridors, hydropower reservoir submerged zones and dams, nuclear power dykes, power grid transmission lines, and external dedicated rail lines [claim-3]. Safety buffer zones around explosive storage facilities for mining and coal operations, as well as public green spaces managed by coal firms, also remain exempt during both construction and operation [claim-3]. The policy shift addresses preferential tax regimes that have been in place for nearly 40 years [claim-5]. State media and economic experts cited in official coverage highlighted that prolonged exemptions resulted in low land-use efficiency and distortion of tax neutrality [claim-5]. By narrowing tax relief to public welfare and safety functions, regulators intend to encourage intensive land utilization, foster ecological restoration, and standardize tax conditions across industrial competitors in support of a unified national market [claim-5].