Following the reduction on May 1, 2018, the VAT rate will continue to be reduced from April 1, 2019 according to the Announcement on Policies for Deepening the VAT Reform (Announcement [2019] No. 39 of the Ministry of Finance, the State Administration of Taxation and the General Administration of Customs, hereinafter referred to as the “Announcement No. 39”). The comparison of tax rate changes has been summarized as follows:
Main content
From April 1, 2019 New provision
From May 1, 2018 Old provision
Grant Thornton Comment 1
· The VATtax rate for taxpayers engaging in sale or importation of goods, taxable labor services, and lease of tangible movables
·
13%
16%
From April 1, the red invoices shall be issued at original applicable tax rate if the invoices were issued at 16% and 10% before the VAT reform.
The invoices for VAT taxable activitiesshall be issued at original applicable tax rateif the invoices were not issued before the VAT reform.
In case of the above two situations, the original applicable tax rate can be manually selected in the VAT invoice controlling and billing software to issue the VAT invoice
· The VATtax rate for taxpayers engaging insale of transportation, postal, basic telecommunications, construction, lease of immovables, etc. and agricultural products
9%
10%
For procurement of agricultural products (except those used for production, sales or consigned processing)
Deduction rate: 9%
Deduction rate: 10%
For procurement of agricultural products used for production, sales or consigned processing
Deduction rate: 10%
Deduction rate: 12%
For the exportation of goods or labor services that are subject to VAT at 16%, with the applicable export refund at the same rate
Tax refund rate: 13%
Tax refund rate: 16%
According to Announcement No. 39, the tax refund rate before the reform will continue to be valid by June 30, 2019. Therefore, we suggest on the premise of commercial feasibility that:
1. Trading enterprises: it is suggested that the exportation of goods and labor services procured at 16% and 10% should be declared for export before June 30.
2. Manufacturers: it is suggested to complete export declaration before June 30 to obtain a higher tax refund rate.
For the exportation of goods or cross-border taxable activities that are subject to VAT at 10%, with the export refund at the same rate
Tax refund rate: 9%
Tax refund rate:10%
Please download 2019 China Tax Alert Issue 2 to learn more.
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Download China Tax Alert Issue 2 2019
