China Tax/Business News Flash

Dec 2016, Issue 38

New B2V circular released - Clarification on hot B2V issues to bring more benefits to taxpayers

On 24 March 2016, the Ministry of Finance (MoF) and the State Administration of Taxation (SAT) jointly released Caishui [2016] No.36 on the Comprehensive Roll-out of the Business Tax (BT) to Value-Added Tax (VAT) Transformation Pilot Program (the "B2V Reform") (Circular 36), under which the real estate sector, construction sector, financial services sector and consumer services sector were added to the B2V reform starting from 1 May 2016. Subsequently, the MoF and SAT have released a series of follow-up circulars to clarify the relevant industry issues under the B2V Reform. We have shared our detailed observations in the previous China Tax and Business News Flash and anticipated that more industry issues would be gradually resolved in due course.

On 22 December 2016, the MoF and SAT jointly issued Caishui [2016] No.140 (Circular 140) to clarify multiple industry issues for the financial services sector, real estate sector, modern services sector and consumer services sector. The more important issues include, detailing the taxable scope of loan services and trading of financial products, clarifying the taxpayer of asset management products, extending the deduction scope under the net sales method for real estate development enterprises, and stipulating the tax category and tax rate for sale of take-away food by taxpayers in catering service. The major provisions in Circular 140 took retrospective effect from 1 May 2016. Besides, VAT that has been paid by taxpayers on activities eligible for exemption or non-VAT taxable treatment can be offset against VAT payable of the taxpayer in the future. In this News Flash, we will share our interpretation on the above issues in detail, analyse the impact on taxpayers as well as share our observations and views. 

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