China's VAT Reform to Benefit More Businesses

Over 1 million more taxpayers will be included in China's value added tax (VAT) reform, which is set to expand nationwide in August, according to the State Administration of Taxation (SAT).

In an effort to avoid double taxation for businesses, the Chinese government introduced a pilot plan in Shanghai last year to replace the business tax in transport and some service sectors with a value-added duty that is charged only on the added value of each link in the production chain.

The plan was later extended to another 11 regions, including Beijing, Tianjin and Shenzhen, and the government decided in April to spread the practice nationwide starting August.

In the first five months of 2013, the reform has eased tax burdens by 40.6 billion yuan (US$6.57 billion) for 1.29 million businesses in the nine regions that first piloted the scheme, deputy head of the SAT Xie Xuezhi has revealed.

In addition to bringing the reform to more regions, the government is also considering extending the plan currently applied to transport and some service industries to more areas.

The State Council, China's cabinet, said in April that it would extend the reform "at a due time" to railway transport, postal services and telecommunications industries.