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China's new VAT rules impact hotels and lifestyle services

04/22/2016| 1:20:44 PM|

Chinese regulators issued new rules and rates on VAT applicable to industries transitioning from Business Tax to VAT with effect from 1 May 2016

On 24 March 2016 China’s Ministry of Finance and State Administration of Taxation jointly issued Circular Caishui [2016] 36 (Circular 36) which contains the Value Added Tax (VAT) rates and rules applicable to the industries which are transitioning from Business Tax (BT) to VAT with effect from 1 May 2016.  

In this KPMG China Alert, the impact specifically for the lifestyle services sector is examined.

The lifestyle services sector comprises a large and diverse range of taxpayers, including food and beverage providers, hotels and other hospitality providers, the travel industry, education and healthcare providers.

From a policy perspective, these sectors present challenges to the government in applying VAT given that some of them are involved in cash based businesses where historically tax compliance may not have been high (e.g. food and beverages), the consumption of these services may be for business or private purposes and distinguishing between them may not be easy (e.g. hospitality services), and finally, because they serve an essential community need which is often funded or supported by government (e.g. education and healthcare), yet may also be served by the private sector.  

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TAGS: VAT | hotles
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