A joint notice from China’s Ministry of Finance and the State Administration of Taxation confirmed that VAT will now be charged from 1 January 2018, reports the South China Morning Post (SCMP).
Under the changes, a 3% tax will be charged instead of a more complication 6% that had been due to come into force on 1 July, retroactive to May 2016.
China completed its VAT reform in May 2016 and announced plans to make the remaining four industries – finance, construction, property and consumer services – to pay VAT instead of business tax.
However, following complaints from industry that the levy was unfair, implementation has been delayed twice.
According to SCMP, China is one of the first countries in the world to have a VAT applied broadly to the finance industry, including on the transfer, issuance and redemption of financial products.
Seeking clarification
Stella Fu, a tax partner at professional services giant PwC in Shanghai, told SCMP that she is seeking clarification in some areas, including how the interest income from bonds shall be taxed.
“We expect further clarifications from the tax authorities. More fundamentally, a question mark still remains as to whether it’s fair for assets managers to be responsible for the tax and bear the risk because the ultimate beneficiary is investors.”
