Value Added Tax Program to be Implemented in Shenzhen
Shenzhen is one of the ten cities implementing a pilot program on the value added tax (VAT) starting August 1st until the end of the year. This means that several businesses will be seeing tax cuts. The value added tax will also replace business tax in the modern services and transportation industry.
First launched in January 1st in Shanghai, the value added tax was meant to streamline taxes in the service sectors while cutting taxes for small businesses. During the rest of the year it was slowly implemented in Beijing, Shenzhen, Taijin, and Xiamen and the provinces of Jiangsu, Guangdong, Anhui, Zhejiang, Fujian and Hubei. In Shenzhen the taxation bureau selected 50,000 companies to take part of the trial program.
The value added tax programs will allow companies to deduct parts of their purchases of services and goods to the amount of taxes they need to pay, unlike business tax which is already added to the total revenues of the business. The value added tax program will also reduce tax burdens on several businesses in the service sectors ranging from transportation, assets leasing, logistics, advertising, consultations, information technology, research and development. And since the development of the service industry is one of the top priorities of the city, it will really help on its development.
By next year China will further expand the program and implement reforms in selected industries nationwide.