Beijing Applies for Implementation of VAT Reform Pilot Project

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Jan. 3 – To resolve the issue of duplicate taxation on goods and services and support the development of the modern service industry, the State Administration of Taxation (SAT) and Ministry of Finance (MOF) issued the “Pilot Project Plan for Replacing the Collection of Business Tax with Value-added Tax (caishui [2011] No. 110)” (“Pilot Project Plan”) in November 2011.  Shanghai will be the first location to implement the pilot project in the transport and certain modern service sectors beginning January 2012.  The details of the pilot project in Shanghai are summarized in our previous posting here.

Recently, the Beijing municipal government officially submitted its application to the MOF and SAT to commence the pilot project reform in the transportation industry and certain modern service industries. As a major city in China, it is not surprising that Beijing would be the second city to participate in this important tax reform.

The added value of the service industry in Beijing takes up over 75 percent of GDP for the area, the highest nationally. Implementing the pilot project is expected to promote the optimization of the structure, expand the scale, and improve the quality and prosperity of the service industry.  This, in turn, is expected to drive the development of the regional economy such that it has a greater degree of participation in the global economy.

Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in China. The firm specializes in assisting foreign enterprises with their tax obligations. For further advice and specifics relating to these recent measures, please email china@dezshira.com, visit www.dezshira.com, or download the firm’s brochure here.

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1 thought on “Beijing Applies for Implementation of VAT Reform Pilot Project

    Chris Devonshire-Ellis says:

    VAT is a more fiscally productive tax, so this comes as no surprise. However, it does equate to a minor readjustment upwards, which if rolled out on a national basis, does mean the Chinese exchequer generates more income. Or, to put it another way, another small cut to bleed businesses additional previously profitable income. And so it continues. – Chris

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