Making sense of disruption – the changing tax policies of Mainland China
It was an important year for the global economy, with the trade war between the United States and China, continuing throughout 2019, and tit-for-tat tariffs being raised by both countries before a deal was signed in January 2020. The tariffs slowed down exports and the overall growth rate of the Mainland economy. The government determined that it was a good opportunity to refocus the economy, from being export and investment-led, to a more consumer spending-focused economy.
It was therefore also an important year for tax policies in Mainland China. Throughout the year, the government introduced new tax policies and revised others. The year began with a reform of the individual income tax regime, which enhanced taxpayers’ involvement in their own tax filing status, increasing the allowances and lowering tax rates for many taxpayers.
There were also new value-added tax (VAT) policies to help implement the decision to re-energize the economy. Rates were reduced, changes were introduced to the export VAT refund regime, VAT recovery was allowed up front for certain immovable property and passenger transport, and the refund arrangement for incremental excess VAT was adjusted.
The country therefore entered 2020 with a very different tax system to the one it had entered 2019 and a still changing economy. But 2020 had its own surprises in store, with the COVID-19 pandemic causing the shutdown of many businesses and government services from Chinese New Year until mid-March. Although the economy is beginning to return to normal, restarting the economy is a slow process. This shutdown has seen tax bureaus stop their work, including investigations into transfer pricing, and focus more on ad hoc support measures for the economy.
The situation is still developing, but businesses operating in the country need to be up to date on the latest developments.
To find out how the changes in tax policies and the COVID-19 pandemic have affected the Mainland China economy, join the 2020 China Tax Conference. The conference will take place on Saturday, 23 May from 10:00 a.m. – 3:00 p.m. and will be carried out virtually as two separate sessions, morning and afternoon. The conference will feature renowned speakers, including some from the Institute’s Taxation Faculty China Tax Subcommittee, sharing their insights on the latest developments in the Mainland.
The speakers will cover four major areas: (i) transfer pricing and anti-avoidance, (ii) individual income tax, (iii) corporate income tax, and (iv) VAT.
With business operations becoming more expensive in the Mainland, multinational enterprises are considering whether to move out of the country. The decision to change operations leads to practical issues that need to be addressed. To help business leaders, there will be a roundtable discussion about tax strategies for business transformation.
Enrol now and learn how to make sense of the disruption to your operations in the Mainland.
William Chan is Partner at Grant Thornton Tax Services and a member of the Institute. He is Chairman of the Institute’s Taxation Faculty Executive Committee and Convenor of its China Tax Subcommittee. He has over 20 years of experience in providing tax services and has worked in the United Kingdom, Hong Kong and Mainland China.