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:

  • May 2016
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.
  • Jun 2014
Introduction of VAT on telephony.  11% on calls and handsets; 6% on data-related services
  • Jan 2014
Postal services and railway transport latest services to be introduced into pilot.
  • Aug 2013
VAT pilot extended to whole of China.
  • July 2013
Non-resident companies excluded from pilot.

Extends pilot to further 12 new provinces, including: Hebei; Jiangxi; and Xinjiang.
  • Jan 2012
New services introduced into pilot, including: architecture, environment, conferences and live events.
  • Sep 2012
10 new provinces to be included in Shanghai pilot: starting with Beijing; and then Tianjin; Shenzhen; Xiamen; Guangdong; Jiangsu; Zhejiang; Anhui; Fujian; and Hubei.

Unraveling the mysteries of Chinese VAT

Webinar: Unraveling the mysteries of Chinese VAT

Join Avalara and KPMG as we review China’s VAT system and how it differs to common VAT systems around the world. 

Latest Chinese news

China further 3% VAT cut to 10%

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

China VAT cut to 13% on tariffs concerns

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.

China raises VAT registration threshold

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.