Dec. 6 – The executive meeting of China’s State Council chaired by Premier Li Keqiang decided on Wednesday that China will expand its reform of value-added tax (VAT) in lieu of business tax (BT) to the railway transportation and postal service industries starting on January 1, 2014.
According to the meeting minutes posted on the State Council’s website, VAT reform is considered a critical part of China’s continued fiscal and tax reforms. Over the past two years, the pilot reforms have proven effective in pushing the development of China’s service sector and boosting the country’s job market.
By including the railway transportation and postal service industries in the VAT reform, “all transportation businesses in China will be covered by the VAT in lieu of BT reform starting next year, which will not only ease the overall tax burden for the transportation industry but also further lower the tax burden on enterprises in relevant industries nationwide, especially small and micro-sized enterprises,” said the meeting minutes.
Under the new VAT reform, railway transportation and postal service providers will now be able to issue special VAT invoices which may be used by general taxpayers as a deduction against their own total VAT payable.
The VAT reform replaces BT with VAT in the transportation industry and certain modern service sectors, with the objective of perfecting the VAT deduction chain and reducing tax burdens for taxpayers. First implemented in Shanghai at the start of 2012, the reform then expanded to Beijing in September 2012 and Jiangsu, Anhui, Fujian, Guangdong, Tianjin, Zhejiang, and Hubei later in the same year. It was further expanded nationwide starting on August 1, 2013. As of February 2013, the pilot reform has saved participating taxpayers more than RMB40 billion, according to statistics released by China’s MOF and SAT.
Currently, the following services are covered under the VAT reform and have been paying VAT since August 1, 2013:
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