If you’re a business with overseas
In April, China’s State Council announced that the VAT pilot program will expand throughout the nation on August 1st, 2013. Back in January of 2012, China began a process of phasing in a VAT system to compliment and eventually replace the existing Business Tax (‘BT’). Both VAT and BT are indirect taxes which account for over 50 percent of the Chinese government’s tax revenue collection. Because of the complexities associated with operating in a VAT system in some geographic locations and a BT system in others, this national tax reform is expected to be welcomed by much of the business community. Prior to August 1, this program is only active in eight provinces in China.
Many important sectors of the economy still remain within the scope of the traditional Business Tax system, but that’s expected to change, assuming that this latest rollout goes smoothly. These holdout sectors account for the bulk of Business Tax revenue, and there are some additional complexities in
If you’re thinking about international expansion into China, it is imperative that you understand how China’s VAT system differs from other VAT systems around the world, and to what extent you may still be operating within the scope of BT at least for the time being. Under the unique VAT system, it is critical that you take certain steps for responding to the VAT reform. To ensure a smooth and efficient process, you may want to consider the following suggestions:
1. Properly train your employees on VAT compliance processes
2. Implement a VAT task force
3. Detect major
4. Highlight system solutions and adjustments
Also, when in the implementation stage, designate a project manager who will develop the project plan, allocate internal tasks, and monitor progress and reporting. A clear strategy to prepare for the VAT reform program in China will ensure you stay in compliance and avoid losing money in the future.
This post was written by Nick Hart, Director, Advisory Services, High Street Partners. For more information on the China Vat Reform Pilot, and for general tips on expanding into China, listen to HSP’s recent