China’s plans to include telecoms services in the VAT pilot are progressing. It was confirmed in the Chinese Parliament that plans are advanced, although there was no indication of the VAT rate to be applied. This rate is expected to be 11%, compared to the current 3%-5% Business Tax rate. Many carriers are drawing up phone plans to include free handsets so as to avoid VAT charges on them.
The Chinese VAT pilot was introduced in Shanghai in 2012 on ranges of supplies including IT, consulting and transport. It was extended to the whole country in 2013 to a range of services. It is expected that all supplies will be subject to the new VAT by the end of 2015. The largest sectors still to be tackled, aside from telephony, are real estate and financial services.
