China’s indirect tax system has recently transformed from a from a bifurcated system — with Value Added Tax (VAT) applying to the sale and importation of goods, and Business Tax (BT) applying to services — into a single unified VAT system applying to both goods and services. China embarked on significant VAT reforms beginning in 2012 which resulted in VAT being progressively expanded to the services sector. The final stage of the VAT reforms was completed on 1 May 2016, resulting in all service sectors transitioning from BT to VAT nationwide.
China now operates two types of indirect taxes – VAT which applies to all goods and services and consumption tax which applies to specified luxury goods.
As indirect taxes in China comprise over 60 percent of the government’s total tax revenue, the management of indirect taxes is an important issue for businesses in China. KPMG has dedicated indirect tax partners and specialists, supported by a Centre of Excellence, to assist clients with their indirect tax needs.