Certain Updates on China VAT Reform
As from 1 July 2017, the 13% VAT rate was abolished in China and the rate for agricultural products, public utilities and cultural products was reduced to 11%. Prior to 1 July 2017, there were four VAT rates in China, namely 17%, 13%, 11% and 6%. A separate rate applies to taxpayers that are subject to the simplified VAT regime. This multiple rate system has created tax disputes and challenges for taxpayers, particularly in determining which VAT rate should be applicable. It has been the Chinese tax authority’s key focus in its VAT reform to streamline the VAT rate brackets and simplify the related tax compliance. The elimination of the 13% VAT rate will mainly affect the following categories of products:
Chinese free-trade zones further ease access for foreign investors
The Chinese State Council has updated foreign investment negative list applicable to all 11 free-trade zones (FTZs). These special zones offer foreign companies tax concessions and simplified administrative procedures and are particularly attractive for high-end consumer goods, electronics, telecommunications and medical companies who want to expand their business to China.