China Slightly Reduces VAT Rate

The State Administration of Taxation in China released a Circular (Cai Shui [2018] No.32), announcing a reduction to the current Value Added Tax (VAT) rate since May 1, 2018. The new rates cover all taxpayers other than the small-scale taxpayers to apply the simplified tax system, whose annual taxable turnover is below 5 million RMB (645 thousand euros).

New Regulations

The current standard tax rate on the taxable transactions and import of goods is 17%, with a special rate of 11% applying to certain industries and transactions. See below the key take-out for the tax revamp:

  • for taxpayers occurring taxable transaction and importing goods, the current rate of 17% and 11% reduces to 16% and 10% respectively;
  • for , the rate applied to deductions is adjusted from 11% to 10%;
  • for taxpayers purchasing goods for the use of manufacturing, production and consigned process, the rate applied to deductions is adjusted from 16% to 12%;
  • for taxpayers exporting goods and receiving reimbursement for such export and cross-border transactions, the rates applied to reimbursement is adjusted from 17% and 11% to 16% and 10% respectively.

Transitional Provisions

For trading company exporting goods and occurring cross-border taxable transactions by July 31, 2018, the reimbursement rate would apply if the current tax rate applies for goods purchased, otherwise the adjusted reimbursement rates should apply. For manufacturing and producing company exported goods and occurring cross-border taxable transactions by July 31, 2018, only the current reimbursement rates apply.

Source: SAT-CN (in Chinese)

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