China: VAT treatment of finance leasing services | KPMG | GLOBAL

China: VAT treatment of finance leasing services, transactions

China: VAT treatment of finance leasing services

China’s State Administration of Taxation issued guidance concerning value added tax (VAT) issues of finance leasing activities. The guidance was issued in light of the transition from the business tax regime to the VAT system in China.


Related content

The guidance is known in English as Announcement No. [2015] 90, “Announcement on relevant VAT issues in relation to the transition of business tax to VAT.” Specifically, articles 3 and 4 of Announcement 90 concern the following VAT issues of finance leasing arrangements:

  • Taxpayers providing finance leaseback services of movable assets may “deduct” or subtract the amount of principal (based on the amount listed in the contract) from the amount of taxable income subject to VAT. If there is no contract amount listed, the amount to be deducted may refer to the repayment amount of the principal.
  • Taxpayers that provide finance leasing services of movable assets and transfer their lease-related receivables to financial institutions (including banks) under a factoring arrangement, are still required to issue VAT invoices to the lessee and to report the relevant amount of taxable income for VAT purposes. The factoring arrangement does not change the business relationship between lessor and lessee.

The effective date for this guidance is 1 February 2016. Unresolved matters will be subject to this new guidance after it takes effect.


Read a January 2016 report prepared by the KPMG member firm in China: New Tax Regulation Clarifying VAT Treatments on Finance Leasing Business Activities

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us


Request for proposal