Recently China has introduced several measures in order to support the companies and the domestic market and to meet the economic target of GDP growth and the social development goals.
Among the measures introduced by Premier Li Keqiang during the annual legislative sessions held by the National People’s Congress in March 2019, there is a further reduction of the value added tax rates applied to manufacturing and service enterprises.
According to the work report provided by the government, the value added tax rates will be reduced following the cut already introduced in 2018. The rates will be decreased from the current 16% and 10% to respectively 13% and 9% and will mainly involve enterprises operating in the manufacturing, transportation and construction industries.
The new rates, that would be likely implemented from April 1st, 2019, follow a cut made just one year ago: in April 2018 the Ministry of Finance and the State Administration of Taxation have jointly issued the Circular Caishui no. 32 (2018) that extended the application of adjusted VAT rate in domestic transactions.
According to the Circular, from May 1st, 2018 the transactions subject to the previous rate of 17% (i.e. sales or import of goods), started to be subject to VAT rate of 16%, while VAT on certain services have been reduced from 11% to 10%.
The above cuts are the last steps of this reform path that has begun in 2012, when China launched the so-called VAT reform aiming to replace the previous business tax with the value added tax. The VAT reform has been implemented in Shanghai and subsequently expanded in other areas; from August 1, 2013 the VAT reform was implemented in the whole territory of China.