It has been reported that authorities in China are all set to replace the current turnover tax with value-added tax in the nation’s telecom sector. The latest announcement was made by the Ministry of Finance and the State Administration of Taxation on April 30, 2014. It has also been stated that the new rules will come into effect on June 1, 2014.
Voice calls and bandwidth leasing are considered to be the basic telecom services and they will be subject to 11 percent VAT. Meanwhile, certain value-added services like data transfer, messaging, as well as Internet access will reportedly be subject to a 6 percent rate. The announcement also stated that telecom services for clients from abroad will be exempt. Liu Shangxi of Ministry of Finance said that VAT helps in creating a fairer market environment. Since the beginning of 2012, the country has been pushing to get a VAT reform.
The reform process began with transportation, as well as some modern service sectors. It then expanded to railway transportation and postal service sectors, before being introduced to telecom industry.
The State Administration of Taxation said that as of the end of March 2014, the reform of VAT has covered nearly 3 million businesses and saved 220 billion yuan for them. The recent changes will help in avoiding double taxation as well as eliminate distortions in tax policies.
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