China's government on Monday announced it would extend its value-added tax (VAT) reform to all industries nationwide from Jan. 1, 2009, to reduce the tax burden on companies by more than 120 billion yuan (17.6 billion U.S. dollars) next year.
The State Council, in an executive meeting, passed in principle regulations on VAT, consumption tax and business tax for promulgation after advised revision.
As part of a stimulus package of 4 trillion yuan to be spent by the end of 2010, the reform was aimed at a shift from the existing production-based to a consumption-based VAT regime, which would enable companies to get tax deductions on spending on fixed assets.
It also scrapped policies that exempted imported equipment from VAT, and removed foreign-funded companies from eligibility for tax rebates on domestic equipment purchases and put them on an equal footing with domestic companies.
The VAT rate for small businesses and the self-employed who fell into the small-scale taxpayers category was reduced to a universal 3 percent from 6 percent for industrial firms and to 4 percent for commercial companies, while the VAT rate for mineral products rose back to 17 percent from 13 percent.
The reform would help encourage technological upgrading at Chinese companies, boost domestic demand, and push for industrial restructuring, said the meeting.
Editor: canton fair