VAT reform exemption exceeds RMB 220 billion, expand to telecommunications

Chinese businesses saved RMB 220.3 billion ($35.5 billion) as of the end of March, due to a pilot scheme to replace turnover tax with value-added tax (VAT).

Yang Yimin, a department director of the State Administration of Taxation (SAT), said the VAT reform had covered nearly 3 million businesses so far.

VAT is levied on the margin between production cost and commodity price on the market. It is favored partly because it can reduce double taxation and lift burdens for Chinese firms, especially smaller ones.

Following regional experiments since the beginning of year 2012, China began piloting the VAT reform in transportation and some modern service sectors throughout the country on 1st Aug. The scope of the reform was then expanded to railway transportation and the postal service from 1 January.

From January to March, 18,648 businesses in the two sectors benefited from the preferential policy with tax exemption near RMB 2.5 billion, according to Yang.

Yang said the SAT is working with other authorities on plans to expand VAT reform to more sectors, including telecommunications, construction, real estate and living services. Living services refer to services that meet people's daily needs, such as catering, accommodation, hairdressing and photography. China will strive to complete VAT reform covering all merchandise and services by 2015.