On 16 November, the Ministry of Finance and the State Administration of Taxation jointly issued a pilot scheme for levying value-added tax in lieu of business tax, and published the Commencement of the Pilot Scheme for Levying Value-added Tax in lieu of Business Tax in the Transport Industry and Certain Modern Service Industries in Shanghai Notice. Published together with the pilot scheme and the notice were other rules such as the Pilot Scheme for Levying Value-added Tax in lieu of Business Tax in the Transport Industry and Certain Modern Service Industries Implementing Measures, Issues Regarding the Pilot Scheme for Levying Value-added Tax in lieu of Business Tax in the Transport Industry and Certain Modern Service Industries Provisions and Transitional Policy on the Pilot Scheme for Levying Value-added Tax in lieu of Business Tax in the Transport Industry and Certain Modern Service Industries Provisions.
According to the Notice, a pilot scheme for levying VAT in place of business tax on the transport industry and certain modern service sectors was to be introduced in Shanghai from 1 January 2012. According to the other rules, the transport industry covers land, sea, air and pipeline transportation services as well as certain modern service sectors which comprise research and development and technical, information technology, cultural and creative, logistics, tangible movable property leasing and attestation consulting services.
Changes in taxation arrangements
Tax rate
Low tax rates of 11% and 6% will be introduced in place of the current 17% standard VAT rate and 13% low tax rate. The leasing of tangible movable property will continue to be subject to the tax rate of 17%; the transport and construction sectors will be subject to 11% rate; while the 6% rate will apply to other certain modern service sectors.
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