On 21 December 2016, China’s Ministry of Finance (MOF) and State Administration of Taxation (SAT) jointly issued Circular Caishui [2016] 140 (Circular 140) which sets out new Value Added Tax (VAT) rules applicable to those sectors which recently transitioned from Business Tax (BT) to VAT, being financial services, real estate and construction services, and lifestyle services. Circular 140 clarifies a number of uncertainties which have arisen in practice, and assists taxpayers by overcoming some of the previous inconsistencies in interpretation which have occurred between tax authorities at a local level.  Importantly, Circular 140 takes effect from 1 May 2016, meaning that its impact will affect all transactions from the inception of the VAT reforms.