China: new VAT rates from 1st May

In order to further stimulate the economic growth, China State Council decided to reduce the VAT rate for several industries starting from May 1st.

The Circular Cai Shui 32 (2018), jointly issued by Ministry of Finance and State Administration of Taxation, extends the application of new adjusted VAT rate in domestic transactions.

From May 1st 2018, the transactions subject to the previous VAT rate of 17% (i.e. sales or import of goods), will be subject to the new VAT rate of 16%. Moreover, the VAT rate on certain services will be reduced from 11% to 10%, along with the decrease of VAT applied on agricultural products, which will be lowered to 10%

VAT adjustments will affect also the VAT refund rate: the exported goods, that are currently subject to 17% VAT refund rate, will be subject to a lower refund rate of 16% from May 1st.

Furthermore, high tech companies and any other eligible enterprise operating in advanced manufacturing and modern services will receive a lump-sum refund for the input VAT yet to be deducted.

Moreover, the new measure unifies the threshold for small-scale taxpayers: the new ceiling of taxable annual sales volume set for small-scale taxpayers has been increased to 5 million CNY, both for industrial and commercial enterprises, from 500 and 800 thousands CNY respectively.

The VAT incentives packages had already delivered a tax cut of 2.1 trillion CNY in the past five years and it is expected that the tax burden on enterprises and individuals will decrease by more than 800 billion this year.

The new VAT rates for general tax payers are available here