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VAT policies to be introduced in 1st half
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CHINA is likely to announce value-added tax policies for the financial sector in the first half of next year in its bid to eliminate double taxation.
Banks, insurance companies and brokerages will pay VAT, instead of business tax, next year that will allow them to deduct some spending from the tax base, PricewaterhouseCoopers said yesterday. The companies are now paying 5 percent tax on their total revenue.
Banks will pay slightly lower tax if they apply rates of 11 and 6 percent for different operations, said Alan Wu, PwC China national indirect tax leader.
Authorities still have to decide whether banks can claim the interests they paid as VAT credits considering the difficulties in gathering invoices from individual clients, Wu said.
For insurance companies, tax rule changes will oblige them to adjust pricing especially with corporate clients and re-insurance companies.
PwC said the firm and various financial institutions have been working closely with the Ministry of Finance, the tax administration and the central bank on the details of VAT policies.
Pan Gongsheng, vice governor of the People’s Bank of China, said last week that policy-makers will strive to settle on a VAT system that is both fair and easy to operate.
PwC said the authorities could announce the policies in the first half, leaving six months preparatory time for companies to adjust their business operations and tax systems.
VAT reforms for real estate and construction industry and other services sectors are also expected to start next year.
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