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VAT pilot program enters Phase II –expanded scope and significant changes

VAT pilot program enters Phase II –expanded scope...

China Tax Alert - Issue 34, December 2013  

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On 12 December 2013, China’s Ministry of Finance (MoF) and the State Administration of Taxation (SAT) jointly issued  Circular Caishui [2013] No. 106 (“Circular 106”) to implement the expansion of the VAT pilot program to  the railway transportation industry and postal services industry from 1 January  2014. The telecommunications sector, which had previously been expected to be brought within the VAT pilot program concurrently,  is now expected to transition to VAT from 1 April 2014. In addition, Circular 106 further expands the scope of the VAT pilot program in some existing industries which are already subject to VAT. Importantly, Circular 106 also makes significant changes to the VAT treatment of a number of areas which are already subject to the VAT pilot program and have been problematic for businesses in those industries – specifically, international goods transportation agency services and the finance leasing industry. Finally, Circular 106 extends certain preferential policies such as offshore outsourcing services VAT exemption policies.  

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