The State Council issued a transition plan on adjusting central and local VAT income division. The notice was issued on April 30 after the State Council released a circular to fully implement the trial program; replacing business tax with VAT.
The plan urged to arouse the enthusiasm of local governments and take to consideration the interests of both central and western regions.
The VAT, turned in by enterprises, will be counted in the shared range of both the central and local governments. The central shares 50 percent of the VAT, while the local shares the other half of the VAT. The turned in income to the central will be given back to the local through tax return, to ensure the local’s existing financial capacity remains unchanged.
The central’s increased amount of income will be distributed to local governments through a balanced transfer payment. This is to assure a stronger support for central and western regions.
The transition plan will be implemented at the same time as the implementation of the VAT trial program - May 1, 2016. The provisional transition period is two to three years. The exact period may be adjusted according to the reform progress and other related situations.