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Tax Reduction Is Beneficial To China's Manufacturing Of The 2025 Industry

Apr 16, 2018

According to data from global accounting firm Ernst & Young, the recently announced tax cuts for manufacturing will greatly benefit the industries related to the "Made in China 2025" strategy.

According to Kenneth Leung, Head of Indirect Tax Business, Ernst & Young Greater China, companies that specialize in equipment manufacturing, R&D and power grids will see their retained VAT policies ease their burden.

As Liang explained, the “Made in China 2025” strategy includes equipment manufacturing and R&D. These companies usually invest heavily in machines, factories, and all other related facilities. It takes a long time before they eventually register sales and profits. With the new policy, VAT can be retained, which means that companies can enjoy tax refunds when they finally report sales results. It can largely guarantee their cash flow and reduce this tax burden.

"This tax reform is not just a tax cut, but it also introduces more ways, such as retention of value added tax, which could not be imagined two years ago," he said.

At the executive meeting of the State Council decided by Premier Li Keqiang on Wednesday, China will cut the value-added tax rate this year as part of a 400 billion yuan ($ 63.6 billion) tax reduction plan to promote high-quality development.

The manufacturing tax rate will be reduced from 17% to 16%. The new rate will take effect on May 1.

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