The 2017 edition of the China Country Value Added Tax (VAT) Essentials Guide provides an overview of the indirect tax system in mainland China. It is intended to assist companies doing business in or with China to navigate the indirect tax system.

China’s indirect tax system was for many years a bifurcated system with VAT broadly applying to the goods sector, and Business Tax (BT) applying to the services sector. In 2012, the Chinese Government embarked upon extensive indirect tax reforms to replace BT, which was generally regarded as an inefficient turnover tax as it taxed businesses at each stage of the supply chain, with a VAT for services industries. The application of VAT for services industries was introduced by way of a pilot program which involved the VAT rules for certain sectors being implemented progressively on a province by province basis, however more recently the implementation of VAT has been done nationwide on an industry-by-industry basis. On 1 May 2016 the VAT pilot program was completed following the expansion of VAT to financial services and insurance, real estate and construction, and lifestyle services, resulting in VAT replacing BT for all services sectors.