China Tax/Business News Flash

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Apr 2016, Issue 11

B2V reform (III) - Levying VAT on consumer services


On 24 March 2016, the Ministry of Finance (MoF) and the State Administration of Taxation (SAT) jointly released Caishui [2016] No. 36 on the Comprehensive Roll-out of the B2V Transformation Pilot Programme ("Circular 36"), under which the consumer services will be transformed from business tax (BT) to value-added tax (VAT) starting from 1 May 2016. The main provisions of the B2V Reform relating to consumer services include: the consumer services industry is subject to the general VAT method at the tax rate of 6%; input VAT for catering services, resident daily services, and entertainment services is not creditable; preferential treatments for the consumer services industry under the BT regime are mostly retained; VAT pilot taxpayers providing tourism services are taxed on a net basis; VAT pilot taxpayers providing cultural and sports services, education and medical services, tourism services outside China are eligible for the VAT exemption treatments for exported services, etc.. Taxpayers should be familiar with the details of Circular 36, study the various VAT administrative measures, pay closely attention to the subsequent circulars of the B2V Reform, and timely analyse the impact brought about by the B2V Reform and act accordingly.

In our China Tax and Business News Flash regarding <B2V Expansion Measures Released - VAT Chain is Now Completed for All Industries> dated 24 March 2016, we have analysed the overall objective, arrangement, and future development of the B2V Reform. In this China Tax and Business News Flash, we will share our observations and insights on the B2V Reform policy and practical challenges of the consumer services specifically.

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