On 28 April 2017, the Ministry of Finance and the State Administration of Taxation jointly issued Notice 372 to implement a VAT policy proposed by the State Council earlier this year, to simplify the current four-bracket VAT rates into three. As background, general VAT payers are currently subject to VAT at rates of 17%, 13%, 11%, and 6% based on the different types of goods and services supplies. The four-bracket VAT rates have caused many practical and compliance difficulties for taxpayers as they need to properly classify their supplies to ensure that they charge the correct VAT rate. The replacement of the 13% VAT rate with 11% rate can help to partially relieve taxpayers from these difficulties.

According to Notice 37, the currently 13%-rated goods will be subject to VAT at 11% from 1 July 2017. These goods include:

  • agricultural products
  • certain life necessities, including edible vegetable oil and salt, tap water, heating, air conditioning, hot water, coal gas, liquefied petroleum gas, natural gas, methane gas and coal/charcoal products for household use
  • books, newspapers, audio and video products, magazines and electronic publications
  • feed, chemical fertilisers, agricultural chemicals, agricultural machinery and plastic-film for agricultural purposes