China Lifts Tax-free Thresholds for Business Tax and VAT Collection

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Nov. 1 – As part of its “structural tax reform,” China has decided to raise the tax-free thresholds for business tax (BT) and value-added tax (VAT) collection starting from today, in a bid to reduce tax burdens for enterprises, especially for small businesses.

In the “Decision on Revising ‘Implementation Details on Interim VAT Provisions’ and ‘Implementation Details on Interim BT Provisions’ (MoF Decree No.65)” released on October 28, the Ministry of Finance (MoF) stipulated that, the VAT-free sales value will be lifted as follows:

  • VAT-free sales value of goods: Monthly sales of RMB5,000 to RMB20,000 (increasing from the previous RMB2,000 to RMB5,000)
  • VAT-free sales value of taxable services: Monthly sales of RMB5,000 to RMB20,000 (increasing from the previous RMB1,500 to RMB3,000)
  • VAT-free sales value of each transaction: Sales of RMB300 to RMB500 per transaction/day (increasing from the previous RMB150 to RMB200)

The tax-free thresholds for BT collection are also elevated:

  • Tax-free threshold for termly BT payment: Monthly business turnover of RMB5,000 to RMB20,000 (increasing from the previous RMB1,000 to RMB5,000)
  •  Tax-free threshold for BT payment on each transaction: Business turnover of RMB300 to RMB500 per transaction/day (increasing from the previous RMB100)

Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in China. The firm specializes in assisting foreign enterprises with their tax obligations. For advice, please email tax@dezshira.com, visit www.dezshira.com, or download the firm’s brochure here.

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