China: VAT exemptions expanded for financial services | KPMG | GLOBAL

China: VAT exemptions expanded for financial services sector

China: VAT exemptions expanded for financial services

Guidance issued by the tax authorities in China expands upon the value added tax (VAT) exemptions made available for the financial services sector.


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A circular, Caishui [2016] 70 (30 June 2016)—jointly issued by the Ministry of Finance and the State Administration of Taxation—expands the categories of VAT exemptions for the financial services sector.

When the VAT regime launched on 1 May 2016, VAT generally was set to apply to most financial services transactions—including fee-based services and many margin-based services or products. Thus, lending activities for which interest income was derived and gains derived from trading in financial products were to be subject to VAT. Only limited exemptions were provided.

With the release of Circular 70, policymakers have responded to concerns expressed by the financial services sector just ahead of the first VAT filing deadline for banks (set for 20 July 2016).

Retroactive effective date

The new guidance is effective retroactively to 1 May 2016—meaning that the expanded VAT exemptions will affect all transactions of the financial services sector from the inception of the VAT regime.


Read a July 2016 report prepared by the KPMG member firm in China: New Circular expands upon China’s VAT exemptions for financial services industry

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