China’s Ministry of Finance and the State Administration of Taxation jointly issued guidance to expand the value added tax (VAT) pilot program to apply to the railway sector, the postal delivery services sector, and the telecommunications sector. The VAT pilot program also is being expanded with respect to other industrial sectors already subject to VAT.

Circular 106 (Caishui [2013] No. 106, 12 December 2013) reflects the following concerning the VAT pilot program:

  • The railway (transportation) and postal delivery sectors will be subject to the VAT pilot program beginning 1 January 2014.
  • The telecommunications sector will transition to a VAT regime beginning 1 April 2014.
  • The scope of the VAT pilot program will be expanded for certain existing industries already subject to VAT.

Circular 106 also provides changes with respect to the VAT treatment in a number of areas, to resolve certain items that have been problematic for certain business sectors, including the international goods sector, transportation services sector, and the financial leasing sector. Certain preferential policies and VAT exemption policies are being extended in some areas, such as offshore outsourcing services.