Monday, 02 April 2018 06:14

VAT changes in China starting from May

Shanghai, China Shanghai, China

Good news about the Chinese VAT tax rate since the Chinese State Council, during the meeting chaired by Premier Li Keqiang and held on 28 March 2018, announced that China will cut VAT tax rates related to some industrial sectors. The State Council decision is part of a tax reduction plan amounting to 400 billion yuan ($63.58 billion) to drive high-quality industries development.

Indeed, the meeting pointed out that in China the tax reduction over the past five years has reached the amount of 2.1 trillion yuan.

In accordance with the deployment of the CPC Central Committee and the State Council, the reduction aim to improve the tax system and support the development of the manufacturing and small enterprise. From the 1st of May 2018 the manufacturing industries (sales of goods, importation of goods, leasing of tangible movable property, repair and processing services) VAT rate will be reduced from 17% to 16%, and the transportation, construction, basic telecommunications services industry, postal services, agricultural goods and water and gas supplies value-added tax rate will be reduced from 11% to 10%. It is estimated that the tax cut amount for this tax year will be over 240 billion Yuan.

Moreover, China’s State Council announced an increase of threshold for small-scale taxpayer status from CNY 500,000 for manufacturing and CNY 800,000 for retail and wholesale, to CNY 5 million for all sectors, while allowing companies currently registered as general taxpayers to register as small-scale taxpayers in a certain time period if qualifying as a result of the change (small-scale status taxpayers pay a flat 3% VAT without the deduction of input VAT).

In addition, enterprises related to advanced manufacturing such as equipment manufacturing, R&D and other modern service industries, and power grid enterprises will be entitled to a one-off refund of excess input VAT credits accumulated over a specific period.

The new VAT rate will be applied to:

Current rate

New rate from 1 May 2018

Sales of goods, importation of goods, leasing of tangible movable property, repair and processing services



Transportation services, sales and leases of immovable property, basic telecommunications services, construction services, postal services, agricultural products and water and gas supplies



During the meeting, Premier Li Keqiang highlighted that all the businesses registered in China - domestic and foreign enterprises - will benefit from the VAT cuts, so this measure will involve also Joint Ventures and the Wholly Foreign Owned Companies (WFOE).

These decisions mark a little step of a huger plan. Premier Li pointed out that no industry will see its tax burden increase in the course of these VAT reform. Indeed, the Chinese government has announced that more measures will be implemented to improve the national VAT system and stimulate the vitality of the market.

In conclusion, these measures shall lighten the tax burden for the process of good production and circulation, and innovation enterprises. They will help the transformation of the economic structure but, in order to analyze the concrete results, we need to wait for its implementation.

For more information email our Shanghai office at This email address is being protected from spambots. You need JavaScript enabled to view it.

Additional Info

Related items

  • Hong Kong implements the two-tiered profits tax rates regime

    On March 29 2018, Hong Kong’s Legislative Council passed Inland Revenue (Amendment) (No. 3) Ordinance 2018 (the Ordinance) to implement the two-tiered profits tax rates regime announced in the 2017 Policy Address.

    The two-tiered profits tax rates regime will be applicable to any year of assessment commencing on or after April 1, 2018. The profits tax rate for the first $2 million of profits of corporations will be lowered to 8.25 per cent. Profits above that amount will continue to be subject to the tax rate of 16.5 per cent. For unincorporated businesses (i.e. partnerships and sole proprietorships), the two-tiered tax rates will correspondingly be set at 7.5 per cent and 15 per centA tax-paying corporation or unincorporated business may save up to $165,000 and $150,000 each year respectively.

  • Ireland - budget 2018

    The Irish Government announced the Budget 2018 on the 10th of October 2017, with some changes in critical areas like taxation and social welfare.

  • Spring Budget 2017 - The Highlights

    Chancellor Philip Hammond presented his Spring Budget to the House of Commons.