China’s Reduced VAT Rates
May 15, 2018
China recently lowered its value-added tax (VAT) rates, as part of an RMB 400 billion (US$64 billion) tax cut package.
The Ministry of Finance (MOF) and the State Administration of Taxation (SAT) recently released the Circular about Adjusting the Rates on Value-added Tax, which clarify the information of the new VAT .
As per the circular, the tax cuts lessen the 17 percent VAT bracket to 16 percent, and the 11 percent VAT bracket to 10 percent. The six percent VAT bracket stays unaltered. The new VAT rates will become effective on May 1, 2018.
The MOF and SAT additionally recently released the Circular about Unifying the Standards of Small VAT Taxpayers, which extends the criteria for firms to qualify as a small-scale VAT taxpayer. Small-scale VAT taxpayer are presently characterized as those whose yearly sales are not as much as RMB 5 million (US$796,330). Previously, there were three distinct levels of small-scale VAT taxpayers.
The tax cuts are part of a progressing effort to enhance the VAT system and diminish organizations’ taxation burdens. At the yearly two Sessions meetings in March, Premier Li Keqiang expressed that the administration expects to additionally streamline the VAT system by lessening the quantity of VAT brackets from three to two.
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