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.”
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Why is there a difference between the VAT 6% rate and the current rate the goverment actually charges as follows:
Wuhan：6-6.84% by province
Xiamen：6.77%(CNQWO : 6.87%)
@Vanessa: Depending on how local tax authorities collecting the value-added tax, there may be some variations in VAT rates. The final VAT rate is determined by the national VAT rate and additional charges levied locally and collected as part of the VAT burden to make the administrative costs of collecting these relatively small amounts economically viable. These additional charges vary but may include local items such as the cultural undertaking development fee, city maintenance and construction fee, education fee, local education fee and river maintenance fees. (India has a similar system actually known as CESS).
I trust that clarifies the issue. Best wishes – Chris
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