China Cutting Business’ Tax

May 8, 2018 Taxation in China

Bund Sunrise April 16 2018 in Shanghai ChinaBEIJING – Chinese firms are being given tax cuts, and encouraged to spend their savings on technology and training.

Late last week the government of China announced that it will be implementing a series of tax cuts for businesses, ultimately aiming to help modernize the economy by encouraging extra spending on greater use of technology and staff upskilling.

The government are dropping the rate of VAT for businesses, based on the industry in which they operate.

The sale of goods will now see a VAT rate of 16 percent, compared to 17 percent, while businesses in transportation, logistics, and construction will see their tax rate drop from 11 percent to 10 percent.

No changes will be enacted to the already reduced rate of 6 percent for businesses operating in financial or consumer services.

Tech companies will also see an extension of the ability to carry over capital losses, from 5 years to 10 years.

Some experts have claimed that the tax cuts come as a response to the recent tax reform and tax cuts seen in the USA, and the threat of a trade war with the USA.

Following the tax cut, the government of China could see a drop in tax collections of as much as CNY 800 billion, or about 5.2 percent of its receipts for the entirety of the previous year.