MOF, SAT Interview on China Tax Reforms

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Apr. 25 – Newly appointed Minister of the Ministry of Finance (MOF) Lou Jiwei and Director of the State Administration of Taxation (SAT) Wang Jun were interviewed by the official central media of China on April 16 concerning the further development of the pilot reforms on the value-added tax (VAT) in lieu of business tax (BT) and how to deepen the reforms in the financial and tax systems. The Chinese State Council previously announced its plans to have the current VAT pilot reforms, which currently only affect certain trial cities, to expand nationwide starting August 1, 2013. Continue reading…

China Issues Circular Concerning the Improvement of VAT Control System

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Jul. 24 – In order to alleviate the burdens on taxpayers, China’s National Development and Reform Commission (NDRC) released the “Circular of the NDRC on Charging Policies Concerning the Improvement of VAT Control System (fagaijiage [2012] No.2155, hereinafter referred to as ‘Circular’)”on July 18, which provides four opinions regarding the price for special equipment related to the VAT control system and the technical maintenance charging polices.

Key information and details taken from the Circular can be found in the summary below. Continue reading…

Beijing Likely to Commence VAT Reform in August

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Jul. 10 – Earlier this year, following the commencement of the business tax (BT) to value-added tax (VAT) conversion pilot reform program in Shanghai, the Beijing municipal government officially submitted its application to the Ministry of Finance (MOF) and State Administration of Taxation (SAT) to implement the pilot program in Beijing. Since then, enterprises have been awaiting news on its official approval.

In July 2012, tax authorities in Beijing started requiring companies falling under certain sectors to submit forms that include surveys requesting information on total business revenue, as well as applications for general VAT taxpayer status under the pilot project. These forms are due July 13, 2012. Companies that are required to submit these forms are generally engaged in technology related services, R&D services, and consulting in Beijing. Continue reading…

New Issue of China Briefing: Value-Added Tax Reform

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Jul. 4 – The new issue of China Briefing Magazine, titled Value-Added Tax Reform, is out now and will be temporarily available as a complimentary PDF download on the Asia Briefing Bookstore throughout the months of July and August.

As part of China’s tax reform under the 12th Five Year Plan (2011–2015), value-added tax will replace business tax. Shanghai has taken the lead in the value-added tax (VAT) reform, having instituted a Pilot Reform Program for the transportation sector and six modern service industries since January, and Beijing is next. Large-scale geographic expansion is on the way, with nine other cities and provinces having officially applied to participate in the Program so far.

VAT reform is a confusing transition for many and introduces a number of additional questions, such as exactly what types of input VAT are now deductible. Confusion about the new laws may also allow opportunistic companies to charge higher prices and blame the increase on the tax reform. Continue reading…

VAT Reform Rates by Service Type

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Jun. 20 – Following the State Council’s decision in October 2011 to launch the VAT reform pilot program in Shanghai, the Ministry of Finance and the State Administration of Taxation jointly issued circulars 110 and 111 in November 2011, laying out the details of the VAT pilot program.

Please click here (or click on the image below) for a PDF summary of the new VAT rates by service type, as described in these two circulars.

For more on China’s VAT reform, stay tuned for the July/August issue of China Briefing Magazine on the topic set to be released July 1, titled “Value-added Tax Reform.” Continue reading…

Luxury Tax in China

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The Chinese government makes billions on expensive imported products

Op-Ed Commentary: Chris Devonshire-Ellis

Jun. 7 – Luxury tax in China has long been a source of significant revenues for the Chinese government, as anyone who has been able to compare the prices in China for luxury items to those in Hong Kong, for example, will be well aware.

Yet the amount of money generated by China’s taxing such items is staggering. According to HSBC’s China Luxury Tax Report, the country raised RMB1.2 trillion – US$187.9 billion – in luxury taxes in 2010, an amount so large that it constituted 78 percent of all the central government’s spending. Continue reading…

China RO vs. FICE

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Op-Ed Commentary: Chris Devonshire-Ellis

May 9 – Recent changes to China’s tax treatment of representative offices (ROs) have started to infringe on the viability of using an RO as a vehicle for “investment” into China in terms of increasing financial pressure. While often stated as being an “investment” vehicle, alongside wholly foreign-owned enterprises (WFOEs) and foreign-invested commercial enterprises (FICE), the reality is that ROs have never been considered as a vehicle for foreign investment in the strictest sense. Continue reading…

China’s Ministry of Finance Releases Tax Revenues for Q1 2012

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Total tax revenues near RMB2.6 trillion for Q1 2012, but growth is significantly slower than Q1 2011

By Xiaolei Gu

Apr. 25— China’s Ministry of Finance released the country’s tax revenues for the first quarter of 2012 on Tuesday, with highlights including year-on-year (y-o-y) growth in total revenues of 10.3 percent to RMB2.59 trillion (US$410 billion).

However, the 10.3 percent y-o-y growth rate marked the slowest pace recorded in the past three years – down 22.1 percentage points from the year-on-year growth rate recorded in the first quarter of 2011. The growth rates of domestic VAT, excise tax, business tax and corporate income tax dropped 17.8 percent, 6.4 percent, 18.7 percent and 17.4 percent, respectively, compared to the y-o-y growth rates seen in the first quarter of 2011. Continue reading…

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