VAT pilot extends to all sectors from May 1
Print Edition
CHINA’S financial and taxation authorities yesterday said they would expand the value-added tax pilot program to all industries in order to deepen the country’s fiscal and taxation reform.
Starting from May 1, the replacement of business tax with VAT will be extended to construction, real estate, finance and consumer services to reduce the tax burden on all industries, said a joint statement from the Ministry of Finance and the State Administration of Taxation.
Construction and real estate companies will be levied 11 percent VAT while 6 percent will be imposed on finance and consumer service sectors, the statement said.
Tangible goods have been subject to VAT for some time, but the business tax, based on the value of a firm’s sales, was imposed on services. Such a crude system results in a tax on tax: it is charged on the taxes already priced in the supplies they buy. VAT avoids this as it is applied to the value added at each link in the chain of production.
According to an official estimate released after a State Council meeting on March 18, the reform will save taxes by over 500 billion yuan (US$76.8 billion) this year.
A business-tax-to-VAT pilot began in 2012 and has been gradually expanded. It had cut the tax burden of enterprises such as small firms by 641.2 billion yuan by the end of 2015.
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