China Briefing's July/August 2012 issue focuses on the Value Added Tax (VAT) reform in China. The reform is part of the country's fiscal system overhaul under the 12th Five-Year Plan (2011-2015). The main points of the report include:
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Reform Overview: The VAT reform is replacing the Business Tax as part of a broader fiscal system reform in China. Shanghai has led this reform by implementing a pilot program from January 2012, which included transportation and advanced service sectors.
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Geographical Expansion: This pilot program is set to expand across nine other cities and provinces, including Chongqing, Shenzhen, Tianjin, Xiamen, and regions such as Anhui, Fujian, Hainan, Hunan, and Jiangsu.
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Simplified VAT System: The VAT system aims to address dual taxation issues resulting from co-existing Business Tax and VAT systems. It seeks to promote advanced service sector growth by taxing only the added value along the supply chain, rather than the entire sales revenue.
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Impact on Businesses: The report addresses common concerns faced by foreign companies regarding VAT in China, including how to calculate the total costs related to the VAT reform, whether it will increase or decrease overall tax pressure, and how it will impact businesses in the short term.
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Detailed Questions Answered: The report provides detailed answers to questions about the current VAT system, its impact on overall tax pressure, and its effect on businesses in the short term.
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Practical Guidance: The publication also offers practical guidance through resources like news updates, regulatory changes, publications, LinkedIn discussions, podcasts, and contact information for experts.
The VAT reform, initially implemented in Shanghai, is expected to be rolled out nationwide. The aim is to streamline the tax system and encourage the development of the service industry by addressing the issue of double taxation that arises from coexisting Business Tax and VAT systems.
