Tax Study Of Energy Management Contracting

In 1998, China formally introduced Energy Management Contract. With the fast growth of China’s economy, the demand for non-renewable resources such as coal and gas continues to increase, and the shortage of the important energy resources will restrict the future development of China’s economy. In recent years, as the industrialization and urbanization of China, the total demand for energy resources has continued to increase and the contradiction between economic developments. And the supply shortage of non-renewable resources will last long. Sustainable development is a fundamental way to alleviate this contradiction. In this way, we can save energy resources and use the energy resources more effectively. Also, we can try our best to recycle the resources. In 2010, in order to fulfill our country’s commitment of energy saving to the world, as well as to achieve macroeconomic target of soft landing and structural adjustment, China published a number of documents on various aspects of energy service companies giving them financial and tax supports. In support of the state, the Energy Service Companies are flourishing.As energy service companies are highly specialized and the capital recovery is difficult to predict, taking full advantage of preferential policies and taking early prevention of operation risk are particularly important. But in practice, the energy service companies and the tax authorities are often lack of consensus about tax Incentive Policy for lacking of specific and enforceable rules. Many energy service companies’accounting and tax treatments are still in the exploratory stage.This article will study the features of share-based energy management contracting and card the business progress. This article will learn from the advanced experience at home and abroad to discuss the specific entry and requirements of our country’s tax incentives and analyze energy service companies’tax risks to offset the tax administration gaps.In this paper, data analysis and field research methods are used. In the early research, data research is the main method. We will collect documents related to energy management contract taxation issued by State to learn about the status of energy management contracting. In the late research, we will use the field research method which includes two aspects, one is the experience and tax department management system of Jiangsu electric power energy saving service co., LTD, and the operating system of relevant tax authorities. The other is through the research of other energy service company (such as Nanjing, energy technology development co., LTD.,) to get a deeper understanding of the operation pattern of contract energy management.In this paper, we will get the following conclusion:the energy service company should adopt a variety of strategies to strive for the preferential tax and reduce tax risk. 1. Energy service companies should accurately grasp the relevant policies, distinguishing the differences of various kinds of preferential policies, especially the policies of share-based energy management contracting. As we known, the conditions of tax and fiscal subsidies are different and the company can enjoy different tax incentives by participating in different kinds of energy management contracting projects. In order to fully enjoy the preferential policies, energy service companies’ accountants have to analyze different conditions and use different policies.2. Energy service companies should separate the energy management contracting accounts from the energy management contracting accounts to fully enjoy tax Incentive policy. Energy service companies must strengthen their financial management to allocate the income and expenditures to specific projects.3. Energy service companies should accurately grasp the nature of the project, striving to get maximum tax benefits, and then participate in making reasonable policies. Through the above discussion, the energy service company takes most of the project risk, so share-based energy management contracting should be treated as operating leases.4. Apply for tax incentives depending on the specific circumstances of the company. After the implement of replacing the business tax with a value-added tax, applying for tax incentives is not always good for energy service companies. Energy service companies should choose tax incentives according to their ratio of service revenue and equipment prices. Energy service companies should try their best to do tax planning.5. Actively introduce preferential policies of other modes. In practice, other modes are also widely us ed, especially some innovation mode. So, actively introducing preferential policies of other modes can contribute to the implementation of energy conservation.Finally, the article discusses ten different situations to find out the influence of replacing the business tax with a value-added tax. Different companies can find the most favorable treatment according to their energy saving service revenue, price of equipment and raw materials. Meanwhile, energy saving company should actively communicate with the competent tax authorities to enhance understanding and seek consensus.