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
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.
The Chinese State Council has extended the current VAT discount and duty exemption for small value e-commerce imports to consumers.
September 11, 2018
China has announced a further round of tax breaks to aid its exporters. This follows the US proposing new tariffs levying almost $267bn on Chinese imports....
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