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Value-Added Tax Reform

Published: July 2012

As part of China's tax reform under the 12th Five Year Plan (2011 - 2015), value-added tax will replace business tax. Shanghai has taken the lead in the value-added tax (VAT) reform, having instituted a Pilot Reform Program for the transportation sector and six modern service industries since January, and Beijing is next.

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As part of China's tax reform under the 12th Five Year Plan (2011 - 2015), value-added tax will replace business tax. Shanghai has taken the lead in the value-added tax (VAT) reform, having instituted a Pilot Reform Program for the transportation sector and six modern service industries since January, and Beijing is next. Large-scale geographic expansion is on the way, with nine other cities and provinces have officially applied to participate in the Program so far.
 
VAT reform is a confusion transition for many and introduces a number of additional questions, such as exactly what types of Input VAT are now deductable. Confusion about the new laws may also allow opportunistic companies to charge higher prices and blame the increase on the tax reform.
 
To add some clarity to the issue and VAT in general in this issue of China Briefing, we take a look at a number of VAT-related questions, including:
  • How does VAT work in the current tax system?
  • Does VAT increase or decrease the overall tax burden?
  • What's the legal framework of the VAT Reform Pilot Program?
  • What problems do foreign companies often have with VAT?
Value-Added Tax Reform | Asia Briefing
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