On 27 May 2013, the PRC Ministry of Finance (MOF) and the State Administration of Taxation (SAT) issued the Tax Circular Caishui [2013] No. 37 (Circular 37) to extend the BT/VAT reform to all over the country starting from 1 August 2013. This Tax Circular incorporates and replaces the past circulars issued for the purpose of the pilot reform and also brings some additional amendments. The main content of Circular 37 is as follows:

  • Scope of services shifted from BT to VAT - Radio, film and television services are added to the original taxable services. All taxable services provided by or provided to tax payers located in China shall be subject to VAT and no longer BT from 1 August.
  • Small-scale VAT payers, general VAT payers and applicable tax rates - A general VAT payer can issue VAT invoices and credit its input VAT against its output VAT. The applicable VAT rates for calculating output VAT of taxable services are 17% for lease of movable tangible assets, 11% for transportation services and 6% for other taxable services. A small-scale VAT payer shall pay VAT at 3% on the gross amount for its taxable services and is not able to credit any input VAT. A tax payer providing taxable services with an annual transaction value of above RMB 5 million is required to apply for the general VAT payer status. Small-scale enterprises with a transaction value below this threshold can also become general VAT payer upon application, if they keep proper accounting records.
  • Exportation of taxable services - VAT is exempted for exportation of certain taxable services, e.g. consulting services. 
  • VAT payable by foreign tax payers - Foreign tax payers providing taxable services to their Chinese customers are also subject to VAT.
  • lnput VAT creditability for purchase of motorcycles, cars and yachts for self-use - if a tax payer purchases motorcycles, cars and yachts for self-use, the input VAT related to such purchase will be creditable for general VAT payers.