China: policy on nationwide implementation of VAT pilot program published

June 3, 2013

The Ministry of Finance and the State Administration of Taxation (SAT) jointly issued a notice on the tax policy concerning nationwide implementation of the VAT pilot program on 24 May 2013 (Cai Shui [2013] No. 37).

The notice consolidates most provisions of the previously published notices on the VAT pilot program and includes production, showing and publishing of broadcast, television and films as taxable services.

Also some amendments are made to the current policy based on feedback received from the public and the tax administration.

The notice will take effect as from 1 August 2013, and six notices that were published previously on the VAT pilot program, will be abolished on the same date. These notices are:

  • Cai Shui [2011] No. 111
  • Cai Shui [2011] No. 131
  • Cai Shui [2011] No. 133
  • Cai Shui [2012] No. 53
  • Cai Shui [2012] No. 71
  • Cai Shui [2012] No. 86

In addition, paragraphs 16 and 18 of article 3 of Cai Shui [2003] No. 16 (which is concerned with business tax) will cease to apply on 1 August 2013.

The notice contains four attachments, which are:

  • Implementation rules of the VAT pilot program.
  • Regulations on several issues of the VAT pilot program
  • Policy of the VAT pilot program in the transitional period
  • Regulations on tax exemption and zero rate

The implementation rules are divided into eight chapters and contain the provisions on:

  • Taxpayer and withholding agent
  • Taxable services
  • Tax rates
  • Calculation of taxable amounts
  • Time of tax liability, withholding and place of tax payment
  • Exemption and reduction
  • Tax administration and collection
  • Appendix

Regulations on several issues address the special cases such as mixed services, exemption of passenger air transportation and sale of used assets, whereas the policy in the transitional period is concerned with exemptions for special services such as transfer of copyright by individuals, the provision of information and advice on technology transfer and technology research and development.

The last attachment elaborates the rules on the application of exemptions and the zero rate.

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