2018 VAT Reform

Posted by: Kristina Knut
Category: Tax and Regulations in China

China’s State Council executive meeting determined actions to deepen the value-added tax (VAT) reform. The VAT further cut will be effective from May 1st, 2018. Major VAT tax cuts will include:

  • Reduction from 17% to 16% in manufacturing, trading, and importation of goods, leasing of tangible movable property, repair and processing services industries;
  • Reduction from 11% to 10% in transportation, construction, agricultural and telecommunication sectors.

Plus, the current business tax brackets should be revised allowing smaller companies to be eligible for the tax break. Today, annual sales standards to lose eligibility are RMB 500 thousand and RMB 800 thousand; these should be increased to RMB 5 million.

This year, the total VAT saving is expected to be RMB 240 billion.

Both local and foreign companies will be allowed to enjoy the new VAT cut in an effort to pursue the opening-up policies, as already announced by Premier Li with the Government Work Report (March 1st, 2018).

The executive meeting of the State Council additionally provided that a national financing guarantee fund will be established to give a financing guarantee to businesses in all Chinese provinces and municipalities. Official provision will soon be issued.

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Author: Kristina Knut

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