In 2016, the long-waited four-year BT to VAT Reform is officially completed in a “big bang” way. There are three main industries which will transition to VAT nationwide with effect from 1 May 2016, and they are: Real estate and construction, Financial services, Lifestyle services, which encompasses hospitality, food and beverage, healthcare, education, cultural and entertainment services, and a general residual category of any other services which are still subject to BT. In the meanwhile, any other sectors which need consume or utilize real estate, financial services, and lifestyle services in the conduct of their businesses will also be affected by this final stage of VAT Reform.

1. High level policies and general impacts across all industries
Nearly all of the focus of these reforms has been on the taxpayers in these sectors which are primarily impacted. However, every sector is in fact affected, for the simple reason that they all either consume or utilize real estate, financial services, and lifestyle services in the conduct of their businesses.

2. Financial Services impacts
These rules ensure that China will be amongst the first countries in the world to apply a VAT generally to financial services. 6% VAT will apply to nearly all major forms of remuneration derived from financial services, including interest income on lending transactions, on general banking, asset management, securities and trust related services which are remunerated through a margin, commission or fees, and on insurance premiums.

3. Lifestyle Services impacts
Because all businesses invariably consume services from these sectors, for example, food and beverages for employees or for entertainment purposes, hospitality services for conferences, events and business travel, the VAT rules for this sector are of general interest.

4. Real Estate & Construction industry impacts
It is also the most economically sensitive sector affected by these reforms, especially because the VAT rates for the real estate and construction industry are substantially higher than the current BT rates. In effect, real estate includes both sales and leasing, and it affects all major real estate categories, such as residential, retail, office, industrial, commercial property.

• B2V Expansion Measures Released — VAT Chain is Now Completed for All Industries
• B2V Reform (I) - Opportunities and Challenges to the Real Estate and Construction Sectors
• State Administration of Taxation (SAT) issues detailed VAT reform interpretation guidance
• China's Value Added Tax expanded to fully replace Business Tax in major new announcement
• VAT Reform - Summary and key issues for lawyers to be aware of
• Completion of the VAT Reform's Expansion April 2016
• PRC VAT Reform Will Be Expanded to Cover All Industries
• China Expands VAT Reform to New Sectors: Launch Date - May 1
• The final stage of the B2V Reform to be rolled out from 1 May 2016

• Circular on Comprehensively Promoting the Pilot Program of the Collection of Value-added Tax in Lieu of Business Tax, Cai Shui [2016] No.36