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China Tax/Business News Flash 

Dec 2008, Issue 19
  

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The expected and unexpected in the Amended Detailed Implementation Rules of Chinese turnover tax regulations
      
We reported in our News Flash 2008 Issue 17 that the State Council promulgated the amended Provisional Regulations of Value Added Tax ("VAT"), Business Tax ("BT") and Consumption Tax ("CT") (collectively "Amended Provisional Turnover Tax Regulations") on 10 November 2008.
 
In order to ensure a smooth implementation of the amended Provisional Turnover Tax Regulations, their respective Detailed Implementation Rules ("DIRs") have to be amended accordingly.  On 15 December 2008, the Ministry of Finance ("MoF") and the State Administration of Taxation ("SAT") completed the amendments and released the three DIRs.  The Amended Provisional Turnover Tax Regulations and their Amended DIRs will be effective 1 January 2009.
 
We have summarised below the major changes in the Amended VAT DIR and BT DIR.  There are no significant changes to the CT DIR.
 
Key changes in Amended VAT DIR
 
There are four key areas of changes to the Amended VAT DIR.  Some are expected but some are not.
 
Implementation of VAT transformation to "consumption-base"


Clarification of "mixed sales" and "concurrently engaged in VATable and BTable businesses"

Support to small-scale taxpayers

Improvement to administration

Major changes in the Amended BT DIR

The following are the key areas of changes to the Amended BT DIR.  Again, some are expected but some are not.

New definition of "provision of labour services within China"

Clarification of "mixed sales" and "concurrently engaged in VATable and BTable businesses"

PwC observations
 
VAT regime

BT regime

Conclusion

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