Recently, some investors of central state-owned enterprises have reported that as some provinces have started to levy the two taxes on photovoltaic land based on the full area, the group has explicitly required that all projects be calculated based on the full area for the two taxes when passing the review. “Coupled with the electricity price risk under Document No. 136, almost no photovoltaic project can pass the review.”

In response to this, the photovoltaic industry consulted the land use situation of photovoltaic projects in other provinces. Another central state-owned enterprise directly stated that its photovoltaic project located in a certain province in the northwest had already been subject to the two taxes on photovoltaic land based on the full area since last year, and many existing projects that have been completed are about to be “scrapped”. Meanwhile, the central state-owned enterprise has also calculated based on the land and two taxes levied on the entire area of the photovoltaic array. As a result, the projects to be built basically have no possibility of continuing construction.

In the face of the expected decline in electricity prices as stipulated in Document No. 136 to promote the full entry of new energy into the market, the two taxes on photovoltaic land that have been repeated for many years have dealt another heavy blow to the already suddenly cooling downstream investment in photovoltaic.

Full area taxation makes it difficult to calculate the costs for photovoltaic projects

Recently, an investor from Xinjiang told Photovoltaic that last year, photovoltaic projects in Xinjiang have already started to be subject to land occupation tax based on the entire area. The already low electricity price and high power rationing of photovoltaic projects, combined with the cost of land tax, have led to a significant increase. “The project’s return rate is completely unprofitable.”

In 2023, it was planned to levy the tax on the entire area at a standard of 3 yuan per square meter. However, after several rounds of feedback and negotiations among multiple investors, the final levy standard was set at 0.6 yuan per square meter. Even so, if calculated at a standard of 250 mu per 10MW, it would still mean an additional cost of 10,000 yuan per MW per year. “Looking at the 20-year power generation cycle, it means an increase of 0.2 yuan per watt in cost,” the investor said. “The projects in Xinjiang are basically on the verge of loss. Coupled with the impact of Document No. 136, subsequent projects are completely impossible to carry out. Other investors have already returned many photovoltaic indicators.”

Another employee of a central state-owned power enterprise based in a certain province in Northwest China also said that the land occupation tax for his photovoltaic project has been levied on the entire area since last year, with the same collection standard of 0.6 yuan per square meter. The tax on the occupation of cultivated land is also levied on the entire area, with a standard as high as 8 yuan per square meter. “The collection standards before and after the project was completed have been changing again and again, luring photovoltaic enterprises in to ‘kill’ them,” the staff member of the central state-owned enterprise said helplessly.

“At present, the land cost faced by photovoltaic projects is actually extremely high. Even for projects in sparsely populated sandy and barren land bases, the land cost is as high as 2,800 yuan per mu. For instance, the land acquisition fee is about 1,800 yuan per mu, the restoration fee for grassland vegetation on construction land is about 2,300 yuan per mu, and the pension insurance for herdsmen, etc.” ” The staff member of the central state-owned enterprise added, “With the addition of the urban land use tax and the farmland occupation tax levied on the entire area, after Document No. 136 promotes the full entry of photovoltaic power into the market, once it enters the spot market, land taxes and fees are very likely to completely crush power station investment.”

A developer from a central state-owned enterprise in another central and eastern province also said that their project had been urged to pay the two taxes on photovoltaic land, but there was no clear indication of how to pay, when to pay, or the way to define the area, so they could still be in arrears. If a full-scale levy is initiated, “the project’s rate of return will be untraceable.”

Facing the risks of unclear electricity prices and full-area land tax collection as stipulated in Document No. 136, developers from several central enterprises stated that the land tax calculation for approved photovoltaic projects now all requires full-area collection. The vast majority of central enterprises have become increasingly conservative in their investment in photovoltaic projects, and a few have not had any projects approved recently.

The aforementioned investor expressed concern, saying, “As more and more provinces gradually step up the collection of the two taxes on land, how to collect them will become another key factor determining the ‘survival line’ of projects after Document No. 136. With risks in advance, the only option is to strictly calculate the collection based on the entire area.”

The saying “Choose the low rather than the high” has become empty talk

The issue of the two taxes on land in the photovoltaic industry has been plaguing the industry for a decade from the “13th Five-Year Plan” to the “14th Five-Year Plan”. Whether to levy them, how to levy them, and the collection standards have always been at the discretion of local authorities. The land tax standards promised during project development and those after project completion are significantly different, which has also led to a complete disruption of the revenue model of photovoltaic projects. Many projects have fallen into a loss-making situation.

In 2023, the National Energy Administration released the “Case Interpretation of the Implementation Plan for Promoting High-Quality Development of New Energy in the New Era”, clearly stating that the land use tax collection standards in various provinces and cities are not clear, and the phenomenon of multiple taxes in one place occurs frequently. Local discretionary power is large, and many projects still have local tax bureaus and others imposing additional land taxes after being connected to the grid or in operation for several years.

In addition, the collection standards vary greatly, and the tax payment for similar projects in different regions differs significantly. For a 10MW photovoltaic project, the annual tax payment ranges from 78,000 to 2.04 million yuan, which significantly increases the tax burden on wind and solar enterprises. Taking a photovoltaic project in a certain area in Southwest China in 2021 as an example, the land tax and fee for a 200MW photovoltaic power station alone exceeded 150 million yuan, and the project investment cost increased by more than 20%.

Although the National Energy Administration requires all localities to follow the principle of “choosing the lower rather than the higher” to clearly define the scope and standards for the collection of urban land use tax and farmland occupation tax. However, in actual implementation, the discretionary power of local governments has not been restricted

At present, different provinces have three different ways of collecting land tax: based on pile foundation points, square array shadows, and the entire area of the site. The cost of land tax varies greatly among these three methods. “Among the pile foundation area, the projected area of the square array and the site area, there is a 1:10:50 relationship,” an industry insider introduced.

A certain investor in Henan Province previously told Photovoltaic that the project that had been put into operation in 2018 was determined to have an area of about 100,000 square meters based on the shadow area of the components plus other areas, with a tax amount of 430,000 yuan. However, in 2023, the tax authorities required the full area to be paid, with a tax area of 1.738 million square meters, resulting in a tax amount of over 10 million yuan.

It should be emphasized that, based on research and public information, some areas in multiple provinces including Qinghai, Xinjiang, Hubei, Inner Mongolia, Yunnan, Shandong, Henan and Ningxia have begun to levy land taxes on photovoltaic projects. The most basic collection standard is based on the vertical projection area of the array, while in some provinces, it is based on the entire area of the photovoltaic field. Some regions are in a state of being urged to pay taxes and still have room for negotiation, while in some other regions, taxes have already been actually paid.

In this regard, investors also call on local authorities to fully consider the adaptive adjustment of the industry in the initial stage of the issuance of Document No. 136, suspend the collection of the two taxes on photovoltaic land or clarify the collection standards as soon as possible, and give sufficient calculation space, so that investors can maintain sufficient investment confidence.