UPDATE: New VAT Rules and Fewer Tax Rates

In a State Council regular meeting, Premier Li Keqiang announced that starting from 1 July 2017, the tax rates of VAT will be simplified and merged into three categories, including 17%, 11%, and 6%. Previously, China had four VAT rates ranging from 6% over 11%, 13% to 17%.

This change will mainly benefit businesses selling agricultural products, gas products, books, newspaper and magazines, and other agricultural related industries. Previously, most of these products and industries were subject to a tax rate of 13%. Now it will be lowered into the 11% category!

This change is part of the scheme to reduce the tax burden for small and medium-sized businesses as well as companies operating in agriculture, which China wants to render more efficient and mechanized.  For this year’s target, the tax burden will be reduced by RMB 380 billion.

Other tax reduction actions by government bodies

  1. The Ministry of Finance announced on 17 March 2017 that two administrative fees were abolished, including urban public service surcharge, and a special fund for new building materials.
  2. The Ministry of Finance and the National Development and Reform Commission jointly announced that 41 categories of administrative fees were abolished as of April 1st, 2017. 
  3. For small and low-profitable enterprises, if the annual taxable income is below RMB 500,000, the Corporate Income Tax rate is reduced to 20%. This is applicable between 1 January 2017 and 31 December 2019.
  4. For High-tech small and medium-sized enterprises, the so-called Super Deduction for R&D expenses will be raised from 50% to 75% during the period from 1 January 2017 to 31 December 2019.

ECOVIS Beijing is a consultancy focusing on accounting, audit, legal and tax advisory for foreign SMEs and startups in China. If you have any further questions on VAT and tax incentives in China, please contact elizabeth.shi@ecovis-beijing.com

 Elizabeth 150x225  

Elizabeth Shi

Elizabeth Shi is a Senior Tax Manager at Ecovis Beijing. She has over 10 years of working experience in China´s legal, tax and business field. Prior to joining Ecovis, Elizabeth has worked in the Big Four accounting firms’ tax and business advisory departments. She has advised companies on various China tax and legal related matters, including dealing with tax and other government authorities. Her expertise covers tax compliance, restructuring, M&A, tax due diligence, liquidation and deregistration related tax matters as well as tax planning for companies and individual expatriates. Elizabeth started her professional career as a legal consultant in a prestigious IP firm, working on foreign direct investment (FDI) and intellectual property (IP) projects. With her legal background both in academics and in practice, she has a profound understanding of China’s tax system and its operation. For further information please contact:elizabeth.shi@ecovis-beijing.com

 

Ecovis Beijing is the trusted tax and legal advisor to several embassies and official institutions in China. It specializes in mid-sized international companies and is focused on tax & legal advisory, accounting and auditing. If you’re interested in finding out more about tax and legal, don’t hesitate to sign up to our Newsletter, give us a call +86 (10) 6561 6609 or contact us directly via service@ecovis-beijing.com.