China VAT completes May 2016
China has confirmed that it will complete the reform of its Value Added Tax regime by May 2016.
The reforms include the introduction of an OECD-model VAT system which allows for the recovery of input VAT by businesses. VAT will replace the current Business Tax, and the old VAT levy. The reforms were commenced in 2012 in a number of key cities, and then progressed to business sector-by-sector. The final changes due in May will include the introduction of VAT to the real estate, entertainment, construction, healthcare and financial service markets.
Details on the latest reforms will be published to cover the implementation of VAT on financial services. In many countries that do apply VAT, financial services are exempt e.g. the European Union member states. Guidance will also be provided on invoice disclosure requirements and compliance procedures.
The reform of VAT is expected to cost China over $70 billion per annum, but boost the country’s internal consumption by up to 2%.