China VAT

VAT on goods, overseen by the State Administration of Taxation, was introduced into China in 1994 and replaced the Consolidated Industrial and Commercial Tax.  There is a separate tax regime, Chinese Business Tax, for the provision of certain services.  This system is being fundamentally overhauled at the moment, with a successful Chinese VAT pilot in 2012 being extended across China since August 2013.

Should you register for Chinese VAT

Businesses and individuals providing taxable goods and related processing services or who import into mainland China are liable to VAT.  There are two types of VAT registration in China: small entrepreneur; or general business.  There are varying turnover thresholds to determine which category an enterprise is categorised as (up to RMB 800,000 per annum is the cut off), and reporting requirements are different.

Typical situations requiring a Chinese VAT registration include:

  • The importation of goods into China;
  • Where goods are manufactured within China;
  • If goods are reworked or reprocessed in China;
  • Installations in China; and
  • Certain exports of goods from China.

Chinese VAT registration threshold

The registration threshold is Yuan 30,000 per annum.

Non-resident traders operating in China, unlike Europe and many other parts of the world, cannot register for VAT as non-resident traders.  If a trader is providing services into China, its local representative or its customer is responsible for accounting and reporting the tax.

It is more usual in China for non-resident traders to form a local company (e.g. WOFE) in order to register for VAT.

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