China Anhui Province announces VAT pilot trial in October

Tue 12th Jun 2012

It has been reported that the tax authorities in Anhui Province will introduce a pilot VAT regime for the transport and service sector on 1 October 2012.  This news is based on a Shanghai Securities News publication of an internal memo issued by the Anhui Province SAT (State Administration of Taxation).  The report also indicates that another nine Chinese provinces may be involved in pilots, including Beijing, Jiangsu Province, and Huang Province.

China VAT reform a success so far

The initial pilot is underway in Shanghai and Beijing was anticipated to commence in July.  The China VAT scheme in Shanghai has already been well received in that double taxation which took place with the existing business taxes is no longer such a problem.  It is reported that 70% of the 129,000 Shanghai companies participating in the pilot have advised that their tax burdens have been reduced as a result of the facility allowing input VAT deduction.  Only businesses, such as those in the transport sector, were initially experiencing tax increases. For administrative reasons, input VAT deduction of road tolls and fuel expenses had not been at first possible.

The success of the scheme has encouraged service businesses to relocate to Shanghai.  Hence other provinces are keen also to set up the pilot, so as to ensure no loss of their service businesses in their regions.



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