Tianjin, Zhejiang, Hubei Officially Start VAT Pilot Reform

December 4, 2012 Posted by China Briefing Reading Time: 3 minutes

Dec. 4 – Tianjin, Hubei Province, and Zhejiang Province (including Ningbo) officially started the pilot collection of value-added tax (VAT) in lieu of business tax (BT) in the transportation industry and certain modern service industries on December 1. This effectively completes China’s stated 2012 goal of expanding the BT to VAT pilot reform program from Shanghai to “Beijing and seven other provinces and municipalities.” By successfully accomplishing their expansion plans, the pilot BT to VAT reform now covers territories in the north, east, central, and south of the country, and paves the way forward for the next step of the tax reform – national implementation.

The BT to VAT pilot reform has now been enacted in the following regions:

Shanghai Municipality
Beijing Municipality
Tianjin Municipality
Jiangsu Province
Anhui Province
Guangdong Province
Fujian Province
Hubei Province
Zhejiang Province

According to the statistics released by the State Administration of Taxation (SAT), there are currently 34,853 confirmed pilot taxpayers in Tianjin, of which 13,799 are general taxpayers and 21,054 are small-scale taxpayers. In Hubei Province, there exist 33,662 confirmed pilot taxpayers, with general taxpayers standing at 3,745 and small-scale taxpayers at 29,917. Among 104,590 confirmed pilot taxpayers in Zhejiang Province (not including Ningbo), 11,337 of them are general taxpayers and 93,253 of them are small-scale taxpayers. In Ningbo, there are 16,418 confirmed pilot taxpayers – 3,633 of them are general taxpayers and 12,785 of them are small-scale taxpayers.

According to the Deputy Director of Tianjin’s Finance Bureau Liang Xuanjian, implementing the pilot collection of VAT in lieu of BT in the municipality will result in a large decline in the tax burdens of pilot small-scale taxpayers, and most pilot general taxpayers will also benefit. Transitional policies, including preferential tax policies, will be issued to relieve the pressure on taxpayers during the pilot period.

Hubei’s SAT Office estimates that pilot small-scale taxpayers in the province’s modern service industry will experience a 40 percent decrease in tax burdens, and pilot small-scale taxpayers in the transportation industry will have a 3 percent reduction in tax burdens. About 95 percent of the pilot taxpayers will bear an equal or lesser tax burden.

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