CHINA: Within 2018, the Chinese government tax legislation will be implemented to encourage more innovation and reduce the tax burden of smaller companies.
The new legislation has been considered from many to implement the whole system of taxation with the goal of opening up and develop the country’s legislation in order to meet fast growing needs of Citizens.
From May 1st China will cut value added tax rates as part of a tax-reduction package worth of 400billion yuan (US$63.7billion) this year.
The rate will be set at 16% from 17% for manufacturers and several other industries, and VAT on the sector of Transportation, construction, basic telecommunications services and farm production will be lowered from 11% to 10%. The reduction in import tariffs on cars and specified other products are a perfect example. Tariffs on cars and specified other products will be reduced.
One of the main areas considered will be the health care sector.
Aiming to promote the development and production of generic drugs, to cut medical costs, the corporate income tax rate for generic drug makers and high-tech producers, will be reduced to 15%, form the standard corporate rate of 25%.
Moreover, in order to give patients, especially those suffering from cancer, more choices of drugs, tariffs on all imported anti-cancer drugs will drop to Zero from May 1st.
At the same time, protection of intellectual property rights will be strengthened and to defend the interests of drug patent holders and import regulation on imported drug will be eased too.
Small business will be also benefit from the new rules.
Tax incentives are expected for high-tech companies working in advanced manufacturing, modern services and electric utilities. Chinese government is working on allowing “eligible enterprises” to receive lump-sum refunds for input VAT payments yet to be deducted.
To help small businesses, China’s Ministry of Finance and the State Administration of Taxation announced an increase in the threshold for general VAT taxpayers to 5m yuan meaning more businesses can qualify as “small-scale VAT taxpayers” and therefore pay VAT at a rate of only 3%.
By contrast, the VAT for businesses in manufacturing and services, with an annual revenue of more than 500,000 yuan, was set at 17%.
In the same time Chinese Government is also working on tackling those seeking to exploit new advantages as some companies might try to split their organization into smaller-scale companies to pay less tax.
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