China excludes foreign companies from VAT pilot

The Chinese tax office, the State Administration of Taxation, has confirmed that non-resident companies will be excluded from the Chinese VAT pilot.

This will give them a reduction in their potential Chinese income tax bill.  A number of services currently provided to non-resident businesses are liable to the old Service Tax.  This is being replaced in the Pilot by China VAT, which is included in non-residents' Income Tax bill.  By excluding non-residents from the new VAT regime, the income tax base is reduced.