Issuance Date: February 3, 2012 Source: China Taxation News
After the pilot scheme on switching from business tax to VAT was launched in Shanghai, the first tax declaration day fell on February 1, 2012, which saw the steady tax declaration work of those tax payers within the tax reform scope.
At 9:19 a.m., Shanghai Pudong New Area Taxation Bureau handled the tax declaration with Bank of Communications Finance Leading Co., Ltd., Shanghai Eastern Logistics Co., Ltd., Shanghai United International Ocean Shipping Agency Ltd., Shanghai Oriental Pearl Mobile TV Co., Ltd. and Shanghai North Sea Shipping Co., Ltd., and issued the first bill of payment for service VAT in Shanghai's pilot scheme on switching from business tax to VAT, which implied a total VAT amount of 6808987.69 yuan. By 4:00 p.m., 5350 tax payers involved in this pilot scheme completed their tax declaration process, which implied a total VAT amount of 170.2759 million yuan.
As required by the State Council, Shanghai officially launched the pilot scheme on switching from business tax to VAT in the transportation and certain modern service industries on January 1, 2012. On November 16, 2011, Ministry of Finance (MOF) and the State Administration of Taxation (SAT), after approved by the State Council, co-issued the Pilot Scheme on Switching from Business Tax to VAT, and printed and distributed three other supportive documents. To promote this reform successfully, Shanghai issued the implementation measures for the transitional fiscal support policy featured by the "company's honest application, fiscal support by category and timely appropriation of fund". This pilot scheme has the main contents as follows: based on two current VAT tax rates like 17% and 13%, two low tax rates like 11% and 6% are provided as well. Specifically, 11% applies to transportation industry while 6% is adopted by such modern service sectors as R&D and technical service, cultural and creative industry, logistic and supportive service, and visa consulting service. The business tax reduction and exemption policy, which used to be enjoyed by the pilot tax payers' technological transfers, will be replaced by VAT exemption or refunding on tax payment. The current VAT's ordinary tax payers, which purchase services from pilot tax payers, may have input tax withheld. Besides, the applicable policy on balance taxing of business tax shall remain valid within the period of pilot work, but the income whose business tax is levied in the pilot area shall have its VAT collected in the same area. To date, 120,000 enterprises have been involved in the scope of pilot scheme (including about 35,000 general tax payers and 85,000 small-scale tax payers).
According to Bai Jingming, Vice Director of Research Institute for Fiscal Science, Ministry of Finance, this pilot scheme shall be deemed as another significant reform to the goods and labor tax system and the important structural tax cut measures after the full-scale VAT conversion reform was implemented in 2009. The reform will help remove double taxation for goods and labor service, namely business tax and VAT, and provide systematic supports for deepening professional division of labor and accelerating the development of modern service sector by optimizing the structure of tax system and easing the tax burden, thus promoting the transformation of economic development model and economic restructuring.