China: China Tax Regulation Update - March 2012

Circular Number

Issuance Date

Effective Date

Topic

What is new?

Caishui [2012] No. 4

2012-1-12

2012-1-1–2014-12-31

Deed tax exemption for transfer of real estate titles resulting from certain restructurings

Under the previous Tax Circulars Caishui [2008] No.175 and Caishui [2010] No.22, deed tax was exempted for transfer of real estate resulting from qualified restructurings. The two Circulars have expired on 31 December 2011. This new Circular has extended such deed tax exemption to 31 December 2014.

According to the new Tax Circular, no deed tax shall be levied for change of real estate titles resulting from certain restructurings such as share transfers, mergers and splits of enterprises.

Caishui [2012] No. 12

2012-2-7

2011-12-1

VAT tax-control devices and related technical maintenance fees are deductible from VAT payable

According to this Tax Circular, starting from 1 December, 2011, when VAT payers (including smallscale VAT payers) purchase VAT tax-control devices for the first time, the whole purchase price (costs plus input VAT) can be deducted from their VAT payable, provided that such purchase is supported by a valid VAT invoice.

In addition, technical maintenance fees related to such devices can also be deducted from the VAT payable.

News reports (http://finance. people.com.cn/ GB/17137274.h tml)

Updates on BT/VAT reform in China

On 1 January, 2012, Shanghai started the BT/VAT reform in China as the first pilot city. Since then, certain services provided by tax payers in Shanghai or provided by foreign enterprises to tax payers in Shanghai shall be subject to Value-added Tax ("VAT") and not to the previous Business Tax ("BT"). The Chinese government intends to expand the BT/VAT reform across China and to cover all services eventually.

It has been reported recently that Beijing has already submitted its application to become a pilot city to the Ministry of Finance ("MoF") and the State Administration of Taxation ("SAT"). According to several newspapers, Mr. Ji Lin, the Deputy Mayor of Beijing, confirmed that Beijing is preparing for the BT/VAT reform, which is expected to take place in the middle of 2012.

According to news releases, other cities and provinces, such as Tianjin, Chongqing, Jiangsu and Shenzhen are also trying to become pilot cities/provinces for the BT/VAT reform.