China’s State Council has announced a massive round of VAT cuts to be introduced by the end of next month, according to Caixin Global, poised to give businesses annual savings of up to RMB 400 billion ($65.53 billion).
This is the first cut to VAT since the tax was imposed in 1994.
Manufacturing firms will pay a 16% rate from the existing 17%, and transportation, construction, and agricultural sectors will see their rates cut to 10% from 11%.
Also proposed were revisions to the current business tax brackets, allowing more smaller firms to be eligible for tax breaks. Under the new boundaries, a business can take in up to RMB 5 million in sales before losing eligibility for tax relief, ten times the current limit.
In line with the government’s opening-up stance, all the new policies with apply to both domestic and foreign companies.