China Cuts VAT For All Industries

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Nov. 11 – China’s State Council said that beginning January 1, it would reduce value-added tax (VAT) for all industries by more than RMB120 billion.

The move is part of a stimulus package worth RMB4 trillion scheduled to be spent by 2010. It is expected to spur Chinese companies to develop technology, increase domestic demand and thrust industrial restructuring.

The new regulation also aims to encourage a movement from the current production-based VAT regime to a consumption-based one that would allow companies to get tax deductions on spending on fixed assets.

The State Council canceled the rule excluding imported equipment from VAT. Foreign-funded companies are no longer eligible for tax rebates on domestic equipment purchases.

According to China Daily, the VAT rate for small businesses has now been lowered to 3 percent for industrial firms and to 4 percent for commercial companies.