released November 6, 2020

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China will implement a group of measures to cut value-added tax rates, ensuring that the tax burden on all industries will only go down, according to a decision made by the State Council's executive meeting presided over by Premier Li Keqiang on Wednesday.
The Government Work Report this year set out a plan for larger tax cuts, including lowering the VAT rate in manufacturing and other industries from 16 to 13 percent and the VAT rate in transportation, construction and other industries from 10 to 9 percent.
A number of concrete measures were decided upon at the Wednesday meeting to achieve the targets, which will be enacted on April 1.
Input VAT eligible for deduction will be expanded and will cover passenger transportation services. Taxpayers will be able to get their input tax on real estate payments deducted in full on a one-time basis, instead of on two occasions in two years.
Taxpayers whose main business is postal services, telecommunications, modern services or consumer services will receive 10 percent additional input VAT deduction before the end of 2021.
An increase in the overpaid VAT following this round of tax cuts will be refunded.
"The planned VAT cuts must be delivered as soon as possible," Li said.
"Their implementation must be closely monitored to ensure that tax burdens are meaningfully reduced in the major industries and lowered to various extents in some industries. All industries will see their taxes go down, not up.
"In case of an increased tax burden due to inadequate deductions in certain individual industries, the government will work out targeted solutions," he added.
In the Government Work Report, Li said that the government's moves to cut taxes on this occasion aim at an accommodative effect to strengthen the basis for sustained growth while also considering the need to ensure fiscal sustainability. It is also a major measure to lighten the burden on businesses and boost market dynamism.
Participants at Wednesday's meeting also decided on adjustments to the export tax rebate rates of certain goods and services and to the tax deduction rate of purchases of farm produce. They decided to increase transfer payments to local governments, focusing on supporting the central and western regions and counties and prefectures experiencing difficulties.
"The share that goes to enterprises in the national income distribution needs to be increased to boost market vitality. This will help keep employment stable, expand tax sources and make public finance sustainable." Li said.

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