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.

Latest Chinese news

China VAT refunds to bolster exporters hit by new US tariffs

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....

EU VAT obstacles for Chinese companies

September 2, 2018

Chinese enterprises trading across the EU can be hindered by many barriers; particularly EU VAT, which can leave unsuspecting firms facing large fines or...

China VAT cuts boost exports to US despite tariff wars

July 12, 2018

China’s lowering of VAT in May on aluminium exports to the US and rest of the world has helped contribute to a 37% growth...