Chinese legislators are in the process of reviewing a proposed value-added tax law that offers more comprehensive insights into the system governing small-scale value-added tax payers. This initiative is part of broader endeavors to refine China’s business environment.
Presented to the Standing Committee of the National People’s Congress for a second reading on Monday, the draft law builds upon its initial presentation in December 2022. Its purpose is to provide a well-defined framework for businesses with modest taxable sales revenues, contributing to a more efficient business landscape.
In the draft legislation, entities with annual taxable sales revenue not exceeding 5 million yuan (approximately 695,836 U.S. dollars) are categorized as small-scale value-added tax payers. Furthermore, the draft empowers the State Council to adapt this classification according to the evolving requirements of social and economic progress.
The draft also outlines simplified scenarios for tax calculations and specifies procedures for value-added tax credit refunds.
With value-added tax contributing the largest share, around 30 percent, of China’s tax revenue, this legislative proposal holds the potential to alleviate the operational burden on businesses and foster optimistic market projections. Li Xuhong, a professor at the Beijing National Accounting Institute, noted that the draft has the potential to not only alleviate business burdens but also bolster market expectations.