China's finance and tax authorities have issued a notice ending preferential urban land use tax policies for coal, mining, oil and gas, building materials and power companies on their primary production and operational land.

From September 1, 2026 to August 31, 2027, the tax on the restored land will be levied at half the standard rate. From September 1, 2027, the full tax rate will apply.

China introduced the urban land use tax in 1988, levied on entities and individuals using land in cities, counties, towns and industrial and mining areas based on area and applicable tax rates.

The preferential tax policies were introduced when the energy and resources sectors were considered bottleneck industries, with planned pricing and large land footprints, to ease corporate burdens. The exemptions covered a wide range of land types, including direct production areas such as mining sites, waste dumps, and tailings ponds, as well as infrastructure and safety land like railways, roads, and explosives storage zones.

While the policy supported industry growth and eased energy shortages, it also led to low land-use efficiency and tax fairness concerns, increasing the need for reform.

For the coal sector, the tax exemption weakened economic incentives for efficient land use, leading to idle or inefficient occupation of large production areas such as mining sites and waste dumps.

The long-standing preferential treatment created significant tax disparities compared with other industries, distorting market competition and hindering the development of a unified national market.

Companies lacked economic pressure to dispose of decommissioned mines or unused subsidence areas, leading to widespread land hoarding and resource waste.

Additionally, the tax exemption removed the fi