Following the implementation of the Value Added Tax (“VAT”) pilot program in Shanghai (effective 1 January 2012), the Ministry of Finance and the State Administration of Taxation jointly released Caishui  No. 71 (“Circular 71”) on 31 July 2012 to announce the various implementation dates of the VAT pilot program in the following provinces and cities:
The taxation scope and mechanism applicable to Shanghai under the pilot program will be extended to these eight provinces and cities. For airline companies registered in the eight provinces and cities, Circular 71 specifically states that further notice will be released to clarify their applicable turnover tax regime i.e. VAT vs. Business Tax (“BT”).
Circular 71 provides a clear timetable for the implementation of the VAT pilot program in the eight provinces and cities. For BT-paying companies registered in those eight provinces and cities, they should check whether their activities will fall under the scope of VAT pilot program and prepare for the necessary change accordingly. On the contrary, BT-paying companies not registered in locations under the pilot program should stay tuned with the development, and prepare for the future extension of the pilot program to them, if applicable. After all, VAT paying companies should check whether their service providers or customers are affected by the pilot program so as to assess the potential impact on their VAT liabilities and compliance procedures (e.g. VAT invoice control).
Interest parties are invited to read the Mazars tax alerts on the VAT pilot program in Shanghai by clicking on the links below: