Shanghai China extends VAT pilot into new services

Wed 20th Feb 2013

The city of Shanghai, China, has announced plans to extend the net of the new Value Added Tax pilot to include a range of new services.

The move comes following the first successful year of the introduction of VAT on a range of services, including transportation.  The aim is to simplify the tax regime, and the overlap of the soon-to-be-removed Business Tax from VAT.  Following the start of the Shanghai China VAT pilot on 1 January 2012, up to 20 others cities and taxing administrative zones are being added – starting with Beijing.

Whilst the Shanghai pilot has been a success from an administrative point of view, the reduction of effective double taxation has cut the city’s tax revenue.  This, combined with further fiscal falls from the slow down in the economy has left a hole in the city’s budgetary expansion plans.

For this reason, the city authorities yesterday announced plans to include further services in the pilot.