Legal analysis: Water conservancy construction fund is a government fund specially used for water conservancy construction. It consists of central water conservancy construction fund and local water conservancy construction fund. The central water conservancy construction fund is mainly used for the maintenance and construction of major river key projects related to the overall situation of national economic and social development. Local water conservancy construction funds are mainly used for urban flood control and the management, maintenance and construction of small and medium-sized rivers and lakes. The management expenses of major water conservancy construction projects across river basins and provinces (autonomous regions and municipalities directly under the Central Government) and key protection projects of transnational rivers and border rivers in China shall be borne by the central and local governments. In 2022, the local water conservancy construction fund will be levied by half (that is, 0.5‰ of operating income or sales income).

Exemption:

1. Free trade zone enterprises are tax-free. In 2022, enterprises registered in China (Guangxi) Pilot Free Trade Zone (including Nanning, Qinzhou Port and Chongzuo District) and engaged in legal operations will be exempted from local water conservancy construction funds.

2 bulk commodity e-commerce trading platform enterprises are exempted. The preferential policies for water conservancy construction funds of enterprises on e-commerce trading platforms for bulk commodities shall continue to be implemented in accordance with the relevant provisions of the Notice on Suspending the Collection of Water Conservancy Construction Funds of Enterprises on e-commerce trading platforms for bulk commodities (Gui Caizong [2015] No.51).

3. Enterprises that stop production or make losses are exempted. Since 2022, enterprises (except industries restricted or eliminated by the state) that have stopped production for more than 6 months or have a loss of more than 30% of the registered capital within one year may be exempted from the local water conservancy construction fund of that year.

Legal basis: Notice of Shandong Provincial Department of Finance on Matters Related to Exemption of Local Water Conservancy Construction Funds Article 1 From 202 11,local water conservancy construction funds are exempted in our province, that is, the proportion of enterprises, institutions and individual operators that pay value-added tax and consumption tax within the administrative area of this province is1.