China Completes VAT Implementation

May 2, 2016 Taxation in China

BEIJING – Over the weekend China completed the last step in its VAT system transformation.

As of May 1st all businesses in China fall under the scope of the country’s new VAT system, with the previously implemented Revenue tax system being dropped entirely.

VAT is a 11 percent tax charged on the difference between the sale price of a good or service and the manufacturing or purchase price paid by the retailer.

The Revenue Tax system, on the other hand, was a 5.5 percent tax levied on the gross revenues received by the business.

The VAT system has been progressively implemented in different business sectors in China over since 2012, and over the recent weekend the construction, real estate, finance and consumer services sectors were the final sectors to be shifted to the VAT system.

The change in tax systems is expected to reduce the tax burden faced by businesses by as much as RMB 500 billion per year.

Photo By: McKay Savage