Minor VAT rate reduction to exert wide-ranging impacts

From 1 May 2018, the 17% and 11% VAT rates originally applicable to the supply or the import of goods and certain services are reduced to 16% and 10% respectively. Liqun Gao, Deloitte China Tax Partner, was recently interviewed by International Channel Shanghai (ICS) and China Global Television Network (CGTN) about the implications of this rate reduction. Ms. Gao suggests, a minor reduction of 1% actually brings benefits for varied sectors in the supply chain, considering VAT is a broad-based transaction tax. In addition, the annual sales thresholds for small-scale VAT payers to convert to general VAT payers are consolidated and increased effective as of 1 May 2018; while a general taxpayer whose annual sales is still lower than the consolidated threshold may apply to convert back to small-scale VAT payer status within a prescribed time limit. SMEs may benefit from the policies which enable more taxpayers to apply the simplified taxation method under small-scale VAT payer status to reduce their tax management costs. Watch the videos now!