Subsequent to Grant Thornton China's last update in July 2017, this VAT Alert summarizes some of the further significant changes on VAT regulations for your reference. - Revision of the “Provisional Regulations of the People's Republic of China on Value-added Tax” (Referred to as “VAT regulation revision 2017“) - Clarification on Input VAT Issues - VAT regulations on specified financial products - Changes on VAT invoices - Simplified tax administration on registration of general VAT payers

1. 1China tax bulletin
China tax
bulletin
Issue 1 January 2018
Regulation
Interpretation
Cooperation
China VAT Tax Alert:
Latest update on VAT regulations
Subsequent to our last update in July 2017, we summarize
below some of the further significant changes on VAT
regulations for your reference.
Revision of the “Provisional Regulations of the People's
Republic of China on Value-added Tax” (Referred to as
“VAT regulation revision 2017“)
VAT regulation revision 2017 was promulgated by the
State Council on November 19, 2017, while the “Provisional
Regulations of the People's Republic of China on Business
Tax” was abolished at the same time. The main revisions
include:
Adjusting and refining the VAT scope: organizations and
individuals engaging in sales of service, intangible assets
and immovable shall be taxpayers of VAT; and
Simplifying VAT tax rate: 13% VAT rate has been abolished,
and the VAT rate of farm produce/materials, books and
natural gas which are related to livelihood products was
reduced from 13% to 11% from July 1, 2017.
The Current VAT rates in China are:
Tax Items Tax Rate
1. Taxpayers engaging in sale of goods, repair and assembly
services, lease of tangible movables or importation of goods
(unless otherwise stipulated in item 2, item 4 and item 5)
17%
2. Taxpayers engaging in sale of transportation, postal,
basic telecommunications, construction, lease of
immovable, sale of immovable, transfer of land use
rights, sale or importation of the specific goods.
11%
3. Taxpayers engaging in sale of services and intangible
assets
(unless otherwise stipulated in item 1, item 2 and item 5)
6%

2. 2China tax bulletin
Tax Items Tax Rate
4. Taxpayers engaging in exportation of goods
(unless otherwise stipulated by the State Council)
0%
5. Organizations and individuals in China engaging in
cross-border sale of services and intangible assets within
the scope stipulated by the State Council
0%
Clarification on Input VAT Issues
Before January 1, 2018, the procurement of fixed assets,
intangible assets and immovable that are used to both
general tax items and simple tax items, exempted VAT items,
collective welfare or individual consumption, it is allowed
to have the input tax credited against output tax in full.
From January 1, 2018, VAT paid on rental of fixed assets and
immovable are also eligible for fully credit according to
Caishui (2017) No.90 issued on December 25, 2017.
VAT regulations on specified financial products
From January 1, 2018, the simplified tax computation method
shall apply to compute the tax liability of VAT taxable activities
arising from the operation of specified financial products by
the fund managers, and VAT shall be payable in accordance
with the 3% levy rate. The recognition of taxable income in
respect of loan services and transfer of specific financial
products acquired before December 31, 2017 have also been
clarified in Caishui (2017) No.90:
Items
Taxable income
Before January 1, 2018 From January 1, 2018
Loan services The taxable income
shall be all interest
and income of interest
nature derived from loan
services
The taxable income shall be
the interest and the interest
nature income generated
from loan services.
Transfer of
stock (excl.
restricted
stock), bonds,
funds, or non-
commodity
futures
The taxable income shall
be the balance after
deducting the purchase
price from the sale price
The taxable income can be
alternatively calculated
based on the actual
purchase price, or stock
closing price on the last
trading day of 2017, bond
valuation, or fund share net
value and settlement price
for non-commodity futures
as the purchase price to
calculate sales amount
Changes on VAT invoices
From January 1, 2018, when the taxpayer issues VAT
invoice through new VAT invoice management system, the
abbreviation corresponding to the tax classification code
of goods and services will be automatically displayed
and printed in the column of “Name of goods or taxable
labor or service” or “Item” on the invoice according to SAT
announcement (2017) No. 45 issued on December 18, 2017.
Simplified tax administration on registration of general
VAT payers
From February 1, 2018, the examination and approval
process shall be replaced with registration process, under
which taxpayers shall be recognized as general VAT payers
simply after the tax authorities’ verification of the submitted
registration information according to SAT decree No. 45
issued on December 29, 2017.
It is expected that the implementation rules for VAT would be
released in the first half of 2018, in which the relevant details
of the VAT reform regulations that have been promulgated
since year 2011 shall be included. We will follow this closely
and keep you updated accordingly.
Contact Information
China Tax Technical Centre
CNTTC@cn.gt.com
ShanghaiBeijing
China tax bulletin
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Sally Xu
Partner
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E sally.xu@cn.gt.com
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Partner
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E julie.zhang@cn.gt.com
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Partner
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E rose.zhou@cn.gt.com
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E wilfred.chiu@cn.gt.com
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