In Shanghai, following services shall be levied with VAT instead of business tax since 1 January 2012.
- a) “Transportation industry”, including transportation by land, water, air and pipeline and
b) “Some modern service”, including R&D and technical services, information technology services, culture and creativity services, assisting logistic services, tangible personal property rental services and assurance and advisory business services shall be levied with value added tax in lieu of business tax since 1 January 2012.
On top of the original VAT rates at 17% and 13%, two new rates at 11% and 6% were added for the new VAT applicable items.
Lee & Lee Associates Comments: The pilot practice of levying value added tax in lieu of business tax on the transportation industry and some modern service industries in Shanghai is aimed at carrying out structural tax reduction and promoting reform of taxes and fees.
However, it does not necessarily mean that all the companies could enjoy the tax cut benefit. If you want to know whether or not your company’s tax burden would be reduced, you need to do analysis on your cost structure..
Relevant Rule: ‘Notice of the Ministry of Finance and the State Administration of Taxation on Issuing ‘the Plan for the Pilot Practice of Levying Value Added Tax in Lieu of Business Tax’’ Cai Shui [2011], No. 110;
‘Notice of the Ministry of Finance and the State Administration of Taxation on Carrying out the Pilot Practice of Levying Value Added Tax in Lieu of Business Tax on the Transportation Industry and Some Modern Service Industries in Shanghai’, Cai Shui [2011], No. 111
