2018 China tax policy review and 2019 outlook

Feb 2019

The China Tax Policy Review and Outlook is a series of annual publications designed by PwC’s China National Tax Policy Services to review key tax policy developments in China and discuss the trends as well as its impacts on Chinese enterprises from a forward-looking perspective. This 2018 China Tax Policy Review and 2019 Outlook is the fourth issue in the series.

2018 is a crucial year for implementing the 13th Five-Year Plan, marks the 40th anniversary of China’s reform and opening-up. Since the financial crisis in 2008, the global economy has been reviving for a period of time, but the trend of economic recovery has gradually slowed down in recent years. In order to realise steady growth in the domestic economy, China has continued to deepen the supply-side structural reform and advance the development of “Made in China” high quality transformation. At the same time, China has been transforming its role as the “world’s factory” to the “world’s market.” As an important driver to China’s economic growth, the private economy has also gained a lot of attention and support in the past year. During the year, the Ministry of Finance (MOF) and the State Administration of Taxation (SAT) introduced a series of tax policies and reform measures on tax reduction, opening up, business environment improvement, and reform of taxation system as well as tax collection and administration system, while at the same time, process to enact relevant tax legislation are also being speed up.

Some highlights from the 2018 China Tax Policy Review and 2019 Outlook:

  • The amendment to the IIT Law, including combination of comprehensive and schedular taxation system, initial establishment of a comprehensive deduction mechanism, introduction of anti-tax avoidance rules, revised criteria in determining the resident/non-resident status, and transformation of IIT collection and administration system, etc.
  • The optimising tax environment, specifically tax digitalisation, structural reform of state and local tax administration, and simplified administrative procedures for tax-related matters.
  • Review and outlook on policies of reducing taxes and levies such as VAT, CIT, Deed Tax, Land VAT, and tariffs.
  • Continuous support by taxation policies in innovation, entrepreneurship, and R&D.
  • Attraction of foreign investment and updates of international tax policies, covering further liberalisation of market access for foreign investment, expansion of withholding tax deferral treatment for foreign investment, new rules for “Beneficial Ownership”, and updated interpretation of tax treaty articles.
  • Key words on the outlook for 2019 - further tax reduction, encouraging foreign investment, boosting private economy, reform of the tax collection and administration, tax service improvement, anti-tax avoidance, tax legislation, substance requirements, tax policies of digital economy, and Belt and Road Initiative Tax Administration Cooperation. 

Farewell to 2018 and embrace 2019. The head of SAT mentioned, in his New Year Speech, that in 2019 further measures would be taken to deepen the reform of the tax regime, consolidate the achievements gained from the reform of the state and local tax collection and administration system, seriously implement the various tax reduction initiatives, continue to deepen the reform of “streamlined administration, delegated powers, improved regulations services”, and improve the tax and business environment. We believe China will continue with its fiscal and tax reform and focus on fiscal and tax policies to promote economic development in 2019. For taxpayers, various tax reforms in the coming year are worth looking forward to, such as deepening of the VAT reform, adjustment of social contribution rates, as well as the enactment of various tax laws, etc.

Contact us

Peter Ng

Tax Leader, PwC China

Tel: +[86] (21) 2323 1828

Charles Lee

China South and Hong Kong Tax Leader, PwC China

Tel: +[86] (755) 8261 8899

Alan Yam

China Central Tax Leader, PwC China

Tel: +[86] (21) 2323 2518

Jeremy Ngai

China South Tax Leader, PwC Hong Kong

Tel: +[852] 2289 5616

Edwin Wong

Lead Partner, China Outbound Investment Service; China North Tax Leader, PwC China

Tel: +[86] (10) 6533 2100

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