As approved by the State Council, comprehensive roll-out of the pilot programme to replace business tax with value added tax (VAT) has been implemented since 1 May 2016. The construction industry, real estate industry and all other business taxpayers are included in the pilot programme and must pay VAT instead of business tax.
In recent years, construction enterprises have always been the main force of public-private partnership (PPP) projects, and participated in or even led the design, investment and financing, construction, operation, maintenance and other aspects of PPPs. Construction enterprises, as social investors, are generally the shareholders of the PPP project companies, as well as the general contractors of the construction/engineering of the PPP projects.
Since there are many processes and aspects in PPP projects, and their tax-related behaviours are complicated, tax calculation and planning of PPP projects involving construction enterprises has always been a focus of attention. After the replacement of business tax with VAT, the impact of the new tax policy on construction enterprises joining in PPP projects, and its tax calculation and planning etc., is becoming more important.
Wang Jihong is a partner and Han Jiangyu is an associate with Zhong Lun Law Firm
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