Value Added Tax Transformation Reform All Over the Country since January 1, 2009
In 2009, the excepted tax reduction is more than 120 billion Yuan.
The tax on enterprise will be generally reduced for encouragement of investment and domestic demand enlargement.

The value added tax transformation reform and permission of enterprise to deduct relevant value added taxes imposed on the purchased equipment will eliminate repeated taxation factors under the existing production-type value added system in our country and reduce tax burden of enterprise in equipment investment. Under the condition that the existing tax rate remains unchanged, it is a large policy in tax rebate. For avoidance of repeated taxation on enterprise in equipment purchase, it may encourage investment, enlarge domestic demands, promote enterprise technical progress, industrial structure adjustment and economic growth mode transformation and have positive acceleration on stable and rapid development of the economy in our country.

According to different tax deduction modes for outsourcing fixed assets, the value added system is divided into the production type, the income type and the consumption type. The production type disallows any deduction of charged value added taxes included in outsourcing fixed assets. The tax base is equivalent to GDP and the largest, but repeated tax collection is also worst. The consumption type allows deduction of charged value added taxes included in outsourcing fixed assets at one time. The tax base is equivalent to final consumptions and the least, but repeated tax collection may be completely eliminated. At present, among over 140 states adopting value added tax in the world, most of them adopt the consumption-type value added tax. Our country adopts the production-type value added tax currently and will transform it to the consumption type.

Under the condition that the current international financial crisis further spread and the economic growth is slowed all over the world, our country timely adopts the value added tax transformation reform, which is vital to enhance impulse for enterprise development, improve enterprise competitive power and risk resistance ability in our country and overcome adverse effects of international financial crisis on our economy. The value added tax is the first large tax in our country, and this reform will generally alleviate enterprises in tax burdens. It is expected that the Ministry Of Finance will have incomes reduced by over 120 billion Yuan, which is the largest tax rebate in single tax item reform in our history.

To avid repeated taxation on enterprise in equipment purchase
Without regional and industrial confinement, excluding car, yacht and other equipment
The main contents of this value added tax transformation reform scheme are as follows: form January 1, 2009, under the precondition that exciting value added tax rate remains unchanged, common taxpayers may deduct all value added taxes on their newly-purchased equipment all over the country (for all areas and industries). Any remained taxes may be carried over to the next term. To avoid tax loophole, such tax deduction is irrelevant to enterprise technical upgrading and such articles as car, motorcycle and yacht that shall be charged of consumption taxes and may be easily confused as personal consumptions shall be excluded.

From July 1, 2004, the value added tax transformation shall be firstly experimented in eight industries including equipment manufacturing and petrochemical industry in three provinces of northeast China. From July 1, 2007, the experiment area will extend to industries including electric power industry and excavation industry in 26 old industrial bases of six provinces in middle China; from July 1, 2008, the experiment area will be extended to five cities in east part of Mongolia Autonomous Region and suffered areas of Wenchun County, Sichuan Province.