On 29 April 2014 China's Ministry of Finance and State
Administration of Taxation jointly issued Circular Caishui [2014]
43 ("Circular 43") which provides for the entry into the
Value Added Tax ("VAT") reforms of the telecommunications
sector.
The transition from Business Tax ("BT") to VAT for the
telecommunications sector has been much anticipated. However, the
release of Circular 43 provides for a very short timeframe for
transition, with VAT to commence from 1 June 2014. This will prove
challenging given the complexities associated with having multiple
VAT rates in the one industry – Circular 43 provides for an
11% VAT rate for basic telecommunications services and a 6% VAT
rate for value-added telecommunications services. Furthermore, the
discontinuance of a number of concessions which existed under the
BT system means that the scope of these reforms now affect a
broader group of taxpayers, including foreign telecommunications
providers, as well as new forms of
