C1 Energy (Shanghai) – Aug 30, 2010 －－－The Chinese government would give rebates of consumption tax imposed on fuel oil imported as feedstock to produce ethylene and aromatics retroactively from Jan 1, 2010, with validity till Dec 31, 2010, according to a notification jointly released by the Ministry of Finance and the State Administration of Taxation on Aug 20.
Fuel oil produced by domestic refineries and used to produce ethylene and aromatics could be exempt from consumption tax, the notification also said.
Enterprises qualified to enjoy the rebates or tax exemption should have their yield of ethylene and aromatics accounting for at least 50% of the total output of their fuel oil-refined products, it prescribed.
Ethylene and aromatics producers purchasing tax-free fuel oil for marketing purpose and producing no ethylene and aromatics with the feedstock should be levied consumption tax.
Some market sources reckoned promulgation of the policy mainly aimed at the balance of tax exemption policy of fuel oil and naphtha.
Since 2008, China collected no consumption tax on imported naphtha and imposed no such tax on homemade naphtha used to produce ethylene and aromatics.
Independent refineries, major fuel oil consumer in China, may not benefit a lot from the policy, because most of them have no ethylene crackers and aromatics extraction units, the sources denoted.
Although a refinery could produce alkene by heavy oil catalytic cracking unit, output of which occupies not more than 20% of the total yield of all products from the unit, said the sources.
However, with the policy in effect, some refineries may sell gasoline by the name of aromatics to avoid consumption tax of both gasoline and fuel oil, because gasoline is of similar structure with aromatics, the sources deemed.
In China, private chemical plants equipped with ethylene crackers and aromatics extraction units mainly use naphtha and C9 as feedstock at present.
Refineries subsidiary to oil giants Sinopec and PetroChina largely have stable crude supply and could produce naphtha to feed their ethylene units or other refineries underlying the parent companies.
