The latest issue of China Briefing Magazine, titled “Evaluating China’s VAT Reform“, is out now and currently available to subscribers as a complimentary download in the Asia Briefing Publication Store.
- An Overview of China’s VAT Reform
- Navigating VAT Breaks in China’s Crossborder
- Expert Commentary: Expenses not
Eligible for China’s Special VAT Fapiao
At the beginning of 2012, China began a massive overhaul of its tax system by initiating the
replacement of business tax (BT) with value-added tax (VAT). Prior to the reform, VAT was levied only
on the sale and import of tangible goods and on the provision of processing, repair, and replacement
services, while BT was levied on the provision of all other services as well as the transfer of intangibles
and property. As of May 2016, VAT has taken over almost all of BT’s various functions, and is now
effectively China’s only form of consumption tax.
The importance of China’s VAT reform should not be underestimated. Understanding the workings
of VAT is crucial to the success of both existing and newly incorporated China businesses, as failure
to build a tax structure around the reform can easily result in a disproportionate tax burden, or in a
company being fined or even blacklisted. Navigating the reform can be a particular challenge for
US-based investors, who are typically unfamiliar with VAT systems.
In this edition of China Briefing, we walk readers through some of the most salient aspects of the VAT
reform affecting foreign businesses in China. We begin by detailing the key features of the reform,
including how some of its main rates compare to the previous BT rates, and then examine how the
new VAT system can benefit businesses engaging in cross-border services in China – a rapidly rising
segment of the country’s economy. Finally, we explain which expenses are not eligible for China’s
idiosyncratic “special VAT fapiaos”.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email firstname.lastname@example.org or visit www.dezshira.com.
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