Since the start of 2012, China has been undergoing a vast reform of its indirect tax regime.  The includes replacing the antiquated sales tax, Business Tax, with a modern Value Added Tax regime based on OECD principles.  You can read about the existing Chinese VAT and Chinese Business Tax systems here.

The reforms are a major change to the Chinese tax regime since both taxes account for 42% of the total Chinese tax receipts (VAT 27%; Business Tax 15%).

The underlying aim of the reform is a shift away of the Business Tax fiscal burden on corporates (5% to 3% rates) to VAT on consumers (3% to 17% rates).  This will help boost the economy’s growth, and give Chinese business a better global competition tax structure.

Below is a frequently updated summary of the major reform changes: