The State Council has just launched a new round of tax reforms that are expected to lighten China’s tax burden by as much as 400 billion yuan (approx. USD$63.52 billion), primarily via reductions to value-added levies.
On 28 March Premier Li Keqiang convened a meeting of China’s State Council to announce that starting from 1 May 2018, the value-added tax rate for industries including manufacturing would be reduced to 16% from 17%.
The value-added tax for agricultural goods as well as sectors including transport and delivery, construction and basic telecommunications services will reduced to 10% from 11%, with the two adjustments expected to reduce the tax burden by as much as 240 billion yuan.
The State Council also announced that it will standardise value-added tax benchmarks for small-scale tax-payers, as well as provide a one-time rebate for certain input taxes that haven’t yet been fully deducted by qualified enterprises in advanced industries such as equipment manufacturing, as well as modern services sectors such as research and development.
According to National Business Daily the three tax reforms are expected to achieve a combined reduction in the Chinese tax burden of 400 billion yuan.
The move comes following the release of China’s 2018 Government Work Report earlier in March, which flagged further reform of the tax system in 2018, after a reported levy reduction of of 2.1 trillion yuan over the past five years.
According to the Work Report the Chinese government will focus on reductions to the tax rates for industries such as manufacturing and transportation, raise the sales volume benchmark for small-scale taxpayers, as well as expand the scope of micro-enterprises who are recipients of 50% discounts on income tax.