Beijing to Commence VAT Pilot Reform in September

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Aug. 14 – Beijing will officially commence the pilot conversion from value-added tax (VAT) to business tax on September 1, according to a recent statement posted on the Chinese government’s website. On August 9, 2012, a pilot reform initiation conference was held in Beijing and attended by representatives of Beijing Municipality, the Ministry of Finance, State Administration of Taxation to discuss the detailed implementation of the program.

After Shanghai, Beijing is the second VAT pilot region in China. It is estimated that the VAT pilot reform will involve 138,000 enterprises. Small-scale taxpayers and the majority of general taxpayers in the pilot industries will see their annual tax burden reduced by a total of approximately RMB16.5 billion. However, due to differences among enterprises in terms of modes of operation, developmental stages and cost structures, the changes to their tax burdens may vary; the relevant authorities will consider supporting measures to guarantee the smooth implementation of the reform.

According to the statement, replacing business tax with VAT is an effective way to improve the tax system, avoid duplicate taxation and reduce tax burdens, as well as to promote the coordinated development of the tertiary industry.

It is anticipated that the VAT pilot reform will promote the optimization and upgrading of the capital’s economy, and deepen the reform on a broader scope.

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