Evaluating China's VAT Reform

At the beginning of 2012, China began a massive overhaul of its tax system by initiating the replacement of business tax (BT) with value-added tax (VAT). Prior to the reform, VAT was levied only on the sale and import of tangible goods and on the provision of processing, repair, and replacement services, while BT was levied on the provision of all other services as well as the transfer of intangibles and property. As of May 2016, VAT has taken over almost all of BT's various functions, and is now effectively China's only form of consumption tax. In this edition of China Briefing, we walk readers through some of the most salient aspects of the VAT reform affecting foreign businesses in China.