Unification of VAT Levy Rate

Recently the Ministry of Finance, State Administration of Taxation issued a notice: unification of VAT rates. Except for a 5% levy rate applicable to the exploitation of crude oil and gas by Sino-foreign cooperative oil and gas fields, other applicable VAT levy rates of 6% and 4% are unified to 3%, effective from 1st July 2014.

General taxpayers selling their self-used fixed asset where no input VAT credit has been claimed is subject to a 4% VAT, with 50% of the VAT amount exempt is adjusted to a 3% VAT, with an effective VAT rate reduced to 2%.

Taxpayers selling second-hand goods, previously pay a 4% VAT, with 50% of the VAT amount exempt is now adjusted to a 3% VAT, with an effective VAT rate reduced to 2%.

General taxpayers selling the following self-produced goods, previously adopted a 6% VAT levy rate, is now adjusted to a 3% VAT rate:

1.Electricity generated by small scale hydro power units at the county or below level;
2.Sand, soil, and stone for construction or for the production of construction materials;
3.Brick, tile, and lime continuously produced by self-extractive sand, soil, stone or other minerals;
4.Biological products made of microorganisms, microbial metabolites, animal toxins, human or animal blood or tissue;
5.Running water;
6.Commercial concrete.

General taxpayers fallen into one of the following circumstances, previously pay a 4% VAT for simple calculation is now adjusted to a 3% VAT rate:

1.Consignment shops sell consignment goods (including individual consignment of goods);
2.Pawn industry sell dead pawn goods;
3.Duty-free goods sold by duty-free shop approved by the State Council or its authorized government department.

After the adjustments, tax burden of majority special VAT general taxpayer using simple methods will reduce. The move will simplify tax collection and lower the tax burden for some companies, to create jobs and to maintain economic growth.