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China will complete the implementation of the nation's value-added tax regime, in place of business tax, this year, a meeting of China's State Council on January 22, presided over by Premier Li Keqiang, confirmed.
The meeting featured discussion on further implementing the change from business tax to VAT for a broader range of services. That change is seen as "a crucially important part for deepening fiscal and tax reforms. … This will exert great and positive influence on developing the country's service industry, especially hi-tech enterprises, and on industrial upgrading."
Railway transportation services, postal services, and telecom services sectors were added to the VAT base in 2014. In 2016, China is expected to introduce VAT on financial services; construction and real estate; and consumer services such as food, catering, and accommodation.
The existing business tax, which VAT is replacing, is charged at every stage of the supply chain on the gross amount, rather than the net value added. VAT will therefore eliminate the double tax issues encountered by businesses and remove distortions to supply chains.
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