China abolished the income tax for companies and set VAT

Almaty. May 3. Silkroadnews – The Chinese government has released the companies from the responsibility to pay income tax, TASS reports.

Starting from May 1, 2016, the Chinese companies are required to pay value added tax (VAT).
“To implement the new program successfully, the administrations must interpret the new rules correctly while the companies are to avoid tax evasion,” the circular of the State Council of the PRC provides.

VAT transition is expected to affect about 10 million taxpayers operating in such sectors of the economy as construction, real estate, services and finance.

The authors of the law believe the transformation shall ease the tax burden for many organizations. “The reform’s practical benefits shall be mirrored in enterprises that due to the reduction in the government revenues will be able to increase their own productivity. This shall have a positive impact on the multiplier effect of the companies’ market activity,” quotes TASS premier of the PRC Li Keqiang saying.

According to him, due to the transformations in 2016 the tax revenues will decrease by more than 500 billion yuan (about US$77 billion) – the authorities have made up a decision to increase the budget deficit to 3% of GDP (versus 2.3% in last year).

“As the global economy’s recovery goes not that fast-paced, China’s methods of expansionary fiscal policy shall be given a greater role. Thus, for the success of the tax reform this year the government spending will be significantly higher than revenues,” the Chinese premier concluded.