According to an announcement made in October 2011, a Value-Added Tax (VAT) pilot program will be introduced in Shanghai in January 2012, replacing the business tax in selected industrial sectors. Following the early success of that pilot, it looks likely that the program will be extended to Beijing and other locations during 2012.
In China’s 12th Five-Year Plan (2011–15) announced in March 2011, one of the stated goals was to roll out indirect tax reform across China. The VAT pilot program represents a necessary first step toward resolving the issue of duplicate taxation on goods and services in China.
Since Shanghai’s implementation of the VAT pilot program from 1 January 2012, anecdotal evidence suggests a 40% reduction in tax burden for small-scale VAT taxpayers.
Administratively, the State Tax Bureau would be responsible for the administration and collection of the combined VAT system.
