On 25 April 2018, seven tax reduction measures were outlined by Premier Li Keqiang at an executive meeting of the State Council. These measures aim to provide greater support to innovation and small enterprises.
Specifically, these measures include:
The detailed rules in respect of these measures are expected soon, we will keep you informed of any developments.
China's VAT rates and its VAT registration thresholds have been adjusted with effect from 1 May 2018 under Cai Shui  No. 32 (“Circular 32”) and Cai Shui  No. 33 (“Circular 33”), which were jointly issued by the Ministry of Finance (MOF) and State Administration of Taxation (SAT) on 4 April 2018 (see KPMG China Tax Weekly Update (Issue 14, April 2018) for details).
To implement these new rules, three guidance notes were issued by SAT in succession from 19 to 22 April 2018. In particular, these guidance notes clarify updated arrangements for VAT filing and collection, and for issuance of VAT invoices:
On 27 April 2018, an SAT tax official held a webcast which explained these new Circulars in detail. In respect of excess input VAT credits, the tax official indicated that businesses engaged in advanced manufacturing, qualified modern service companies such as those carrying out R&D services, and companies operating electrical grids will be entitled to a one-off refund of excess input VAT credits accumulated over a specific period of time. This has been approved by the State Council, and the implementation rules are under discussion. These should provide further clarity on questions such as the look-back period to which the excess input VAT credit refund may relate.
For details of the VAT rate reductions and other changes, please see the following KPMG publication:
On 3 February 2018, SAT issued Announcement 9. This refines the interpretation of the beneficial ownership (BO) requirement in the dividends, interest and royalty articles of Chinese double tax agreements (DTAs).
Following this, SAT issued Announcement 11 on 9 February 2018, providing clarifications on the DTA treatment of foreign partnerships, as well as the service permanent establishment (PE) time threshold calculation. Guidance on the China DTA transport and entertainer articles was also set out.
Both Announcements 9 and 11 take effect from 1 April 2018 (see KPMG China Tax Weekly Update (Issue 7, February 2018) for details).
On 27 April 2018, the SAT held a webcast which provided further clarifications on Announcements 9 and 11:
For Announcement 9:
For Announcement 11:
With regard to the detailed analysis and impacts of Announcement 9 and 11, please read the following KPMG publications: