China VAT reform
Since the start of 2012, China has been undergoing a vast reform of its indirect tax regime. The includes replacing the antiquated sales tax, Business Tax, with a modern Value Added Tax regime based on OECD principles. You can read about the existing Chinese VAT and Chinese Business Tax systems here.
The reforms are a major change to the Chinese tax regime since both taxes account for 42% of the total Chinese tax receipts (VAT 27%; Business Tax 15%).
The underlying aim of the reform is a shift away of the Business Tax fiscal burden on corporates (5% to 3% rates) to VAT on consumers (3% to 17% rates). This will help boost the economy’s growth, and give Chinese business a better global competition tax structure.
Below is a frequently updated summary of the major reform changes:
||6% financial services and insurance in Spring 2016, including a decision on VAT on interest income.New regime for entertainment, restaurants and hotel accommodation.11% VAT on real estate and construction sectors.Completion of reform by May 2016.|
||Introduction of VAT on telephony. 11% on calls and handsets; 6% on data-related services|
||Postal services and railway transport latest services to be introduced into pilot.|
||VAT pilot extended to whole of China.|
||Non-resident companies excluded from pilot.
Extends pilot to further 12 new provinces, including: Hebei; Jiangxi; and Xinjiang.
||New services introduced into pilot, including: architecture, environment, conferences and live events.|
||10 new provinces to be included in Shanghai pilot: starting with Beijing; and then Tianjin; Shenzhen; Xiamen; Guangdong; Jiangsu; Zhejiang; Anhui; Fujian; and Hubei.|
Latest Chinese news
Oct 12, 2019
China is likely to announce this week that it will cut its main standard VAT rate from 13% to 10%. It has already reduced its VAT rate from 16% to 13% on 1 April 2019. China's economy is slowing rapid
Mar 4, 2019
China is to cut its standard VAT rate from 16% to 13% in 2019 to help its manufacturers struggling with US tariffs, slowing global demand and a domestic debt overhang.
January 14, 2019
China has raised its VAT registration threshold from 1 January 2019 from CNY30,000 to CNY100,000 for small businesses. The measure is temporary for the next two years.
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