# 2013/3 April 2013
Next wave of VAT Pilot Program Key points
Contacts Shanghai Hongxiang Ma Partner
[email protected] +86 21 5047 8665
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From August 1 , 2013 the Value Added Tax (VAT) pilot program shall be launched nationwide along with expansion to further service scopes.
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Besides a geographical expansion also an expansion with regard to further services is expected.
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Thus, Business Tax cost will decrease for a number of taxpayers in China this year.
Hong Kong Claus Schuermann Partner
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Germany Karsten Gnuschke Partner
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# 2013/3 April 2013
1) Background th
On April 10 2013, Premier Li Keqiang announced during a key meeting, that the VAT pilot program will st be expanded to cover entire China starting from August 1 , 2013 in the relevant pilot service sectors. th
Just to recap: On November 16 2011, the Ministry of Finance (“MOF”) and the State Administration of 1 Taxation (“SAT”) jointly issued two detailed implementation measures regarding the VAT pilot program in st Shanghai. The VAT pilot program was subsequently introduced in Shanghai from January 1 2012 onward. After rolling out the VAT pilot program in Shanghai, the MOF and SAT have jointly issued Circular 712, which stipulated the long anticipated second wave of the VAT reform for further regions and cities in China including Beijing and Jiang Su province. The geographical limitations of the VAT reform have created big obstacles in dealing with VAT and Business Tax in the past months. Companies have to assess each transaction depending on location, business partner and service provided whether VAT or BT applies. The harmonisation on a nationwide level will therefore also immensely reduce the administrative efforts with regard to VAT management.
2) Salient Points
The scope of the selected services to be included in the nationwide VAT reform is anticipated to cover the same services and industries as under the current VAT Pilot schemes. Thus, transportation services (excluding railway transport) and selected modern services, which have already been included in the current VAT Pilot program would then be subject to VAT on a nationwide basis.
In addition, the expanded pilot program will also include enterprises in the radio, film and television industry.
Railway transport, postal and telecommunication and other industries should be included in the forthcoming VAT Pilot expansion program. However, the State Council announcement has not indicated a specific effective date for the expansion to such industries.
The government targets to complete the reform by 2015.
3) Conclusion As a vital step in the fiscal reform, the VAT pilot program has achieved remarkable results in easing the tax burden on smaller businesses and promoting economic transformation. According to the Ministry of Finance, in 2012, the VAT reform program helped cutting 42.6 billion yuan (5.3 billion euro) in taxes for companies in the pilot areas. The nationwide expansion will eliminate policy differences between pilot and non-pilot regions. The program will help further cut 120 billion yuan (15 billion euro) in levies for companies in the pilot sectors in 2013. We recommend that companies pay close attention to the further development in this regard in order to be prepared for upcoming changes.
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Cai Shui [2011] No.110, Cai Shui [2011] No.111 Cai Shui [2012] No. 71
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# 2013/3 April 2013
Author
Contact
WTS Consulting (Shanghai) Ltd. Unit 031, 29F, Hang Seng Bank Tower 1000 Lujiazui Ring Road Pudong New Area, Shanghai 200120 PRC Tel: +86 21 5047 8665 Fax: +86 21 3882 1211 www.wtscn.cn
[email protected]
Shanghai Hongxiang Ma Partner
[email protected] +86 21 5047 8665 Hong Kong Claus Schuermann Partner
[email protected] + 852 2528 1229 Germany Karsten Gnuschke Partner
[email protected] + 49 89 28646 139
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