Shenzhen Clarifies Transitional Financial Support Policies for VAT Reform
The Shenzhen Municipal Financial Committee, Shenzhen Municipal Office of the SAT, and the Shenzhen Local Taxation Bureau jointly released the “Circular on the Transitional Financial Support Policies for Business Tax to Value-Added Tax (VAT) Pilot Conversion in Shenzhen Municipality (shencaifa  No.41, hereinafter referred to as ‘Circular’)” on October 30, clarifying financial support issues regarding VAT reform in the city. The main content of the Circular can be found below.
Implementation of transitional financial support policies
In order to implement the business tax to VAT pilot conversion (hereinafter referred to as ‘pilot conversion’) in a steady and orderly manner, according to the State’s taxation reform principle that “the overall tax burden on pilot industries shall not increase or shall be slightly lessened, and double taxation shall be basically eliminated,” pilot enterprises who bear heavier overall tax burdens due to the conversion from the old taxation system to the new taxation system during the pilot conversion in Shenzhen are entitled to transitional financial support policies from November 1, 2012.
The entities receiving financial support shall be the pilot enterprises whose VAT payable under the new tax system is higher than the business tax otherwise payable by them under the old tax system after the implementation of the pilot conversion, and the increased portion shall be at least RMB5,000 per month.
Financial support period
The financial support policies will be implemented from November 1, 2012 to December 31, 2014.
Financial support funds
A financial support fund for the pilot conversion will be arranged by municipal financial departments.
Management of financial funds
Financial support funds shall be managed according to the principle that “enterprises shall file applications according to their actual conditions, finance and tax shall be monitored monthly, funds shall be appropriated in advance on a quarterly basis, funds shall be cleared annually, and key supervision and inspection activities shall be carried out.”