China is set to make VAT rate cuts in order to stimilate economic growth
China's State Council announced that it will cut value-added tax rates as part of CNY400bn (USD $63bn) tax reduction - stimulating growth. Cuts will include:
- VAT on manufacturing will be cut by 1% - down to 16%.
- VAT for transportation, contruction, basical telecommunication services & farm produce will be cut by 1% - down to 10%.
- VAT Rate cuts apply equallt to all businessed registered in China.
China's Premier, Li Keqiang has said the tax reduction measures are an important element of the overall reform of the country's tax regime.
VAT reform was first piloted in Shanghai before being rolled out nationwide in May 2016. It is estimated to have delivered total tax cuts of CNY2.1tn in the past five years.
Further reforms to lighten the tax burden on businesses are planned by China's State Council. This includes:
- Consolidating the three VAT brackets into two
- Adjusting tax rates
- Prioritizing lower rates for manufacturing and transportation
- Raising the VAT registration threshold for small-scale taxpayers.
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