Recently, the Ministry of Finance ("MOF") and the State Taxation Administration ("STA") jointly drew up and issued the Law of the People's Republic of China on Value-added Tax (Draft for Comments) (the "Draft for Comments") for public opinions. Comments solicitation has ended by now.

The Draft for Comments touches upon ten aspects, including the scope of taxation, tax rates and the rate of value-added tax levied on a deemed basis, and taxation period. Among others, the Draft for Comments proposes a few adjustments to the tax rates, setting the applicable tax rate at 13% for sale of goods, processing, repair and replacement services, leasing services of tangible movable property, and imported goods, and at 9% for sale of transportation, postal services, basic telecommunications services, construction, leasing services of real property, real property, transfer of land use right, sale or import of such goods as agricultural products, and keeping it unchanged at 6% for sales services, intangible assets, and financial products. In addition, the rate of value-added tax levied on a deemed basis is set at 3%. Moreover, for the purpose of smooth transition, the Draft for Comments expressly states that "where it is truly necessary to renew the tax policies released before the publication of this law, the renewal may last at latest till the end of five years following the effectiveness of this law, as stipulated by the State Council."

(Source: Ministry of Finance)