China Completes VAT Implementation

Since May 1st 2016, China has now fully rolled out a value-added tax (VAT) system across all industries that previously had a business tax. This completes the most ambitious overhaul of its tax regime in three decades.

China has been moving progressively over the past years from a Business Tax (BT) system to a Value Added Tax (VAT) system in an attempt to streamline China’s indirect tax system. The VAT reform project was launched first as a pilot program in January 2012 in Shanghai with an objective to remove dual indirect tax system and to give Chinese business a better global competitive tax structure in order to boost the economy’s growth.

The final four service sectors, financial services, consumer services, real estate and construction completed the transition to VAT in all service sectors. The replacement of VAT with Business Tax will mean the end of double taxation that businesses in China have faced.