Rumor: China's Telecom VAT Rate Initially Set at 11%
Economic Information Daily, 6/17/13
On June 17, a financial reporter at the Economic Information Daily cited a source as saying that trials of a revised value-added tax (VAT) plan currently call for a VAT rate of 11% on China's telecommunications industry, but that telecom value-added services could be eligible for a 6% rate. Previously, the telecommunications industry had long been eligible for a low 3% business tax rate.
The new VAT trial plan expands on the existing 17% and 13% VAT rates by adding two new, lower tiers at 11% and 6%. If posts and telecoms are designated as "modern service industries," they will be eligible for the 6% rate, an expert at the Ministry of Finance's Research Institute for Fiscal Science said. If not, they will be subject to an 11% rate.
There are three main options for telecom industry VAT plans at present: an 11% tax on all revenues; a 6% tax on all revenues; and an 11% tax on voice services and a 6% tax on value-added services. Internal calculations at China Unicom (NYSE: CHU; 0762.HK; 600050.SH) and other major operators have found that the companies' tax burdens will initially grow under an 11% taxation rate.
Editor's Note: For more background on this topic, please see "Rumor: China to Start Telecom VAT Reform Trials in July" MD 3/14/13 issue and "China's Nationwide VAT Trials to Cover TV, Film, Telecom" MD 4/11/13 issue.
Keywords: wireless government policy China Unicom tax telecom Ministry of Finance voice services 0762.HK 600050.SH CHU Research Institute for Fiscal Science
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