China VAT reform – changing the economy

Mon 20th Apr 2015

The Chinese State Administration of Tax has updated progress made recently on China VAT reform. The program was launched in 2012 with a pilot program to transform the existing VAT and Business Tax regimes into a modern Value Added Tax along the line recommended by the Organisation for Economic Cooperation & Development. In particular, the implementation of VAT supports the wider economic ambition of shifting the country’s economy from production and exports to consumption.

Highlights of the update include:

  • Progress on VAT reforms for the rail and transportation sectors
  • The implementation of the new VAT regime in postal and telecoms services in 2014
  • A roll out of the new VAT regime to several million companies and registered tax payers
  • Details of how the VAT reforms have been eliminating double taxation and offering up opportunities for businesses to recover consumption tax charged to them through the production chain. This led to Yuan90bn being refunded to industry
  • Outlines of case studies showing how VAT reform is enabling growth in the outsourcing services industry as customer may now recover much of the VAT charged to them for the first time
  • Next stage reforms, bringing in the construction, financial services and real estate sectors