China: Draft VAT Law Review

Victor Duarte
January 21, 2020

The Ministry of Finance and the State Taxation Administration are pressing ahead with China’s VAT reform having issued a Consultation Draft of the VAT law of the People’s Republic of China on 27 November 2019.  It called for feedback from the public and other interested stakeholders. This draft law aims to consolidate the reforms and measures adopted during the last eight years within the sphere of VAT including some adjustments and improvements.

The proposed draft law includes provisions to address the following:

  • To adjust the taxable threshold for sales turnover to 300.000 RMB per quarter. Taxpayers below that threshold are out of scope of the VAT law. However, they can opt to pay VAT on a voluntary basis.
  • A tax rate for general sale and import of goods is set at 13%. Some exceptions apply including two reduced tax rates: 9% for certain supplies, and 6% for selling services, intangible assets and financial commodities.
  • For foreign companies carrying out taxable transactions in China, the buyer will be a withholding agent. This rule will apply even if the foreign organization has a business already established in China.
  • Reducing a taxpayer’s compliance burden by replacing the previous three VAT assessment periods of one day, three days and five days into only one half-year base period, reducing the frequency of tax filling. This half-year period doesn’t apply to taxpayers who adopted a general tax calculation method.
  • The information exchange and coordination mechanism are implemented between the tax authorities, banks, customs, foreign exchange authorities, market supervision authorities and other departments to safeguard the further strengthening of VAT collection and administration.

The opportunity to submit comments on the public consultation closed on 26 December 2019. The next step is the deliberation and approval of the law by the National People’s Congress.

This VAT law is welcome.  It’s a step forward by the Chinese Government to improve the tax legal system, increase public participation in legislation, widely consolidate social consensus, and to promote scientific legislation.

Take Action

To find out more about what we believe the future holds, download Trends in Continuous VAT Compliance

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Victor Duarte

Victor is a Regulatory Counsel at Sovos TrustWeaver. Based in Stockholm and originally from Venezuela, he obtained a Law degree and a specialisation degree in Tax Law in his home country. Victor also earned a Master´s degree in European and Internal Tax Law from Lund University in Sweden.
Share This Post

Tax Compliance Tax Information Reporting United States
February 19, 2020
IRS Agrees to more Clarity on Crypto Information Reporting

The Government Accountability Office (GAO), a U.S. Congress watchdog, published a report evaluating the IRS’s approach to regulating virtual currency (crypto) and the guidance it has offered the public. In the report, the GAO offered three recommendations for the IRS, and an additional recommendation for the Financial Crimes Enforcement Network (FinCEN), a bureau of the […]

Asia Pacific E-Invoicing Compliance VAT & Fiscal Reporting
February 19, 2020
India: Standardizing Business-to-Business E-invoice Exchange

With little over a month left to go before the first phase of Indian invoice clearance reform goes live, authorities are still busy finalizing the technical framework and infrastructure to support it. Just a few days ago, changes were made to the explanatory schema of the JSON file that will report data to the tax […]

Asia Pacific Brazil Colombia E-Invoicing Compliance EMEA Italy LATAM Mexico Sales & Use Tax Spain United States VAT & Fiscal Reporting
February 17, 2020
From Alignment to Action: Transforming tax compliance on your terms

What’s your digital transformation strategy? Whether you’re in IT, finance, tax or the executive suite, if that strategy doesn’t include tax, you may be overlooking a huge source of risk – and strategic benefit. It’s time to consider launching a conversation about tax in a digitally transforming world. Which is why we’ve created the “Yes, […]

Asia Pacific Brazil Colombia E-Invoicing Compliance EMEA Italy LATAM Mexico Sales & Use Tax Spain United States VAT & Fiscal Reporting
February 17, 2020
Aligning ERP and Tax: What’s the enterprise upside of tax compliance modernization?

What’s your digital transformation strategy? Whether you’re in IT, finance, tax or the executive suite, if that strategy doesn’t include tax, you may be overlooking a huge source of risk – and strategic benefit. It’s time to consider launching a conversation about tax in a digitally transforming world. Which is why we’ve created the “Yes, […]

Asia Pacific Brazil Colombia E-Invoicing Compliance EMEA Italy LATAM Mexico Sales & Use Tax Spain United States VAT & Fiscal Reporting
February 17, 2020
Tax & IT: How a Unified Compliance Vision Streamlines Digital Transformation

What’s your digital transformation strategy? Whether you’re in IT, finance, tax or the executive suite, if that strategy doesn’t include tax, you may be overlooking a huge source of risk – and strategic benefit. It’s time to consider launching a conversation about tax in a digitally transforming world. Which is why we’ve created the “Yes, […]