China’s State Council announced on 10 April 2013 that the VAT reform pilot program that currently applies in nine cities and provinces will be expanded nationwide and that new service industries will be included within the scope of the reform. The government also confirmed that the VAT reform will be finalized by 2015.

The current pilot services (i.e. two main groups covering transportation services and six groups of modern services) will be rolled out nationwide as from 1 August 2013. Additionally, three new categories of services will be covered under the VAT reform:

  1. Production, broadcasting and distribution of television and radio programs and films;
  2. Railway transportation; and
  3. Postal and telecommunications.

The VAT pilot program currently applies in Shanghai, Beijing, Jiangsu, Anhui, Fujian, Guangdong, Tianjin, Zhejiang and Hubei.

Rollout of VAT also will create an easier and more consistent approach by eliminating the need for taxpayers to comply with two taxing regimes (i.e. VAT and Business Tax), depending on geographical location.