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Trial Announced for Replacing Business Tax with VAT, Reduced Rates of 11% and 6% Added

  Xinhua News Agency Beijing November 17 - Ministry of Finance and the State Adminsitration of Taxation have officially announced on the 17th the trial of replacing business tax with VAT.

  In addition to the current VAT rates of 17% (standard) and 13% (lower), another two reduced rates of 11% and 6% are included. The 17% rate is applicable to the leasing of tangible and movable property;while the 11% rate is applicalbe for transportation, construction, and so on;and the 6% rate is for some modern service industries.

  On principle, general method of taxation applies to transportation, construction, postal and telecommunications,cultural and sports, sales of real estate and transfer of intangible properties.While simple method of taxation applies to finance,insurance, and the living service industry.

  Tax basis. On principle, the tax payer should base on the gross income gained from the taxable transactions.For some industries with plenty of collecting and transferring of payments or disbursement of funds, the collected or disbursed amounts are subject to reasonable deduction.

  Import and export of services.In cases of import of services, VAT is collected domestically, and there's 0 tax or tax exemption for exporting services.

  Attribution of tax revenue.In order to keep the stability of the current fiscal system during the trial period, the business tax revenue will still belong to the original area after being replaced by VAT, the tax revenue will be storaged separately, though.The tax revenue cut will be burdened separately by the central and local governments in accordance with the arrangements of the current fiscal system.

  Transition of preferential tax policies.The original business tax preferential policies granted by the central government for pilot industries can be kept, but for the cases where the double taxation problem can be solved by the reform, the preferential policies will be cancelled.Directed against specific conditions,proper transition policies will be applied.

  Cross-region coordination of tax categories.Part of the trial scheme is to make the place where the taxpayer's organization is located the place for paying VAT, and the VAT paid in other places is subject to reduction from the applicable tax amounts.The non-pilot tax payers doing business in the pilot areas shall continue to declare and pay business taxes according to the current business tax regulations.

  The continuity of VAT deduction policies.If current VAT payer purchases service from a pilot taxpayer, and gets a special VAT invoice, the amount of input tax can be deducted according to the current regulations.

  The trial scheme also specifies that the State Administration of Taxation is responsible for the tax collection and management of replacing business tax with VAT. The State Administration of Taxation is responsible for the formulation of the trial method of tax collection, expanding the VAT management information system and the tax collection and administration information system, designing and uniformly printing VAT special invoices for the cargo transportation industry, and getting fully prepared for and implementing the collection and management.

  In addition, the Ministry of Finance and the State Administration of Taxation have released in the meantime the provisions on the relevant matters of VAT trial in the transportation industry and some modern service industries, and the relevant provisions on the transition policies.

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