There is only one month left until the full launch of the pilot program to replace business tax with VAT on May 1, and a “gift package” of more than 500 billion yuan in tax cuts for the whole year is just around the corner. So, as the largest tax reform in recent years, what are the characteristics of the plan design of replacing business tax with value-added tax? What measures are taken to ensure that the tax burden of all industries is reduced but not increased?
Industries that have implemented value-added tax
The business tax to value-added tax replacement has been fully launched, the deduction chain is more complete, deductible items have increased, and the manufacturing industry and early pilot industries have benefited a lot
For the business tax to value-added tax replacement, "all industries" mainly include two parts: First, industries that have implemented value-added tax, including manufacturing and transportation, postal services, telecommunications industries, and modern services that were previously included in the pilot program of business tax to value-added tax. The second is the four major industries that will be included in the pilot program of replacing business tax with value-added tax, including construction, real estate, finance, and life services.
“After the full rollout of the business tax-to-VAT reform, the deduction chain will be more complete. Many taxpayers who have previously piloted the tax-to-VAT reform and original VAT taxpayers such as those in the manufacturing industry will see a decrease in their tax burden.” National Taxation Li Wanfu, director of the Taxation Section of the State Administration of Taxation, believes that manufacturing production requires factories and warehouses, and enterprises will spend a lot of money whether they build or rent them. Including the four major industries and newly added real estate into the pilot program at one time is of great significance to reducing the burden on the real economy and promoting the transformation and upgrading of the manufacturing industry.
Take the transportation industry as an example. When it was initially included in the pilot program of replacing business tax with VAT, many input taxes could not be deducted, and some companies experienced an increase in tax burdens. As the tax-to-VAT reform is fully rolled out and the scope of tax deductions is further expanded, the tax burden of these enterprises will gradually decrease.
“Each expansion of the business tax-to-VAT reform will increase the number of deductible items, thereby reducing corporate tax burdens.” The person in charge of Anji Automobile Logistics Co., Ltd. introduced that in the early stages of the business tax-to-VAT reform, due to the limited scope of the pilot Due to limitations, enterprises cannot obtain sufficient input tax deductions, and the tax burden has increased. In 2014, the company updated its transportation tools and obtained more input tax deductions. Fully launched this year, deductible items will be further increased, and the tax burden of enterprises will be further improved.
"The four major industries are included in the business tax to VAT reform. Travel expenses, conference fees, and logistics asset purchase and construction expenses that occur in daily operations can be deducted, which will generally result in 3-4 The tax burden has dropped." Liu Xiaozhi, financial manager of Sinotrans Fujian Co., Ltd., said that this will help improve the competitiveness of logistics companies and help them tide over difficulties.
“Highway tolls are an important cost for transportation companies. Transitional arrangements have been made for this in the detailed rules of this business tax-to-VAT pilot. In the future, road and bridge tolls can be paid after obtaining VAT invoices. , the actual tax burden on transportation companies will be further reduced," Li Wanfu said.
The construction industry and the real estate industry
will be changed from the original business tax rate of 3 and 5 to the value-added tax rate of 11, but the tax burden of the entire industry will not increase
The business tax to value-added tax reform has been fully implemented, and the construction, real estate, financial and life service industries have all been included in the pilot scope. The construction and real estate industries are subject to a tax rate of 11, and the financial industry and the life service industry are subject to a tax rate of 6. The society is generally concerned that the construction and real estate industries have changed from the original business tax rate of 3 and 5 to the value-added tax rate of 11. Will the tax burden increase if the tax rate increases?
“If the value-added tax rate is higher than the business tax rate, it will increase the corporate tax burden. This is actually a misunderstanding.” Bai Jingming, deputy director of the China Institute of Fiscal Science, believes that business tax is based on the company’s turnover VAT is levied on the added value of goods and services, and their tax bases are very different. Although the value-added tax rate has been increased, the tax burden of these two industries will not increase or even be reduced because of the input tax deduction.
Bai Jingming analyzed that the main inputs in the construction industry are steel, bricks, cement and other building materials, which can be deducted according to the value-added tax rate of 17, and the deduction is quite strong. In particular, the plan also makes transitional policy arrangements for the business methods of enterprises contracting work and materials, or contracting work but not materials.
General taxpayers can choose to apply the simplified tax calculation method for construction services provided by clearing contractors. Compared with the original business tax rate 3, the corporate tax burden remains generally unchanged.
Similarly, the current business tax rate for the real estate industry is 5, and a tax rate of 11 will be applicable after the business tax to VAT reform. However, due to the increase in input deductions, the tax burden will not increase. According to the reform plan, real estate developers who apply to become general taxpayers are taxed at a value-added rate of 11, and the cost of land transfer fees can be deducted from sales. Among real estate development costs, land transfer fees are the largest part, accounting for 30 to 40% of the entire cost. Land transfer fees can be deducted from sales, which is crucial to reducing the tax burden of real estate companies. In addition, small-scale taxpayers among real estate development enterprises who sell self-developed real estate projects are taxed at a levy rate of 5, and the tax burden of such enterprises will not increase.
Financial industry and life service industry
From the original business tax rate of 5 to 6 VAT rate, the industry tax burden will be significantly reduced
"How to ensure It is both a key and difficult point to reduce the tax burden of all industries and not increase it. The reform plan has made great efforts in this aspect," said Hu Yijian, professor at Shanghai University of Finance and Economics and director of the Institute of Public Policy and Governance. In order to achieve this goal. , the plan not only gives full consideration to the tax system design, but also retains the original preferential business tax policies, and also introduces corresponding supporting measures based on the characteristics of each industry.
Financial services mainly include financial and insurance business activities, such as loan services, direct fee financial services, insurance services and financial product transfers. The life service industry covers a wide range of areas, including cultural and sports services, education and medical services, tourism and entertainment services, catering and accommodation services, daily services for residents and other life services.
“From a tax burden comparison perspective, without considering input tax deductions, a VAT rate of 6 is equivalent to a business tax rate of 5.66, which is very close to the current business tax rates of these two industries. " Hu Yijian explained that after the business tax to VAT reform, the amount of deductible input tax in the financial industry and the life service industry will increase, and the tax burden of the two industries will be significantly reduced.
Most of the office spaces in the financial industry are high-end real estate, and they have a high degree of electronic informatization and heavy investment. Through the purchase of real estate and related equipment, as well as the outsourcing of technical services, the financial industry is more likely to achieve tax reductions. Judging from the relevant details, the original preferential business tax policies for the financial industry will basically be retained and continued after the business tax to VAT reform. For example, interest income from financial interbank transactions is exempt from VAT, personal insurance with a term of more than one year within the pilot period is exempt from VAT, agricultural insurance is exempt from VAT, etc.
The life service industry is almost all-encompassing and closely related to people’s lives. General taxpayers are subject to a tax rate of 6, and there are various deductible inputs. For example, if you open a gym, the venue rent, purchased fitness equipment, etc. can be used as input deductions; if you open a restaurant, purchase and rent of storefronts, store decoration, kitchen equipment, etc., can also be used as input deductions.
“Another obvious feature of the life service industry is that there are a large number of small and micro enterprises. As small-scale taxpayers, these enterprises will be subject to simplified collection at a tax rate of 3 after the business tax to VAT reform, which is different from the original tax rate of 5 Compared with the business tax rate, these enterprises have a tax reduction of about 40%, and the effect is very obvious," Hu Yijian emphasized.
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