China VAT cut on seafood processing, sales set to kick in
China’s seafood processing and distribution businesses could be in for a lift next week when a new value added tax (VAT) reduction kicks in. As part of a CNY 2 trillion (USD 297.3 billion, EUR 264.2 billion) tax cut stimulus package, China’s government is cutting the VAT rate for processing companies from 16 percent to 13 percent, effective 1 April.
Meanwhile, there’s been a cut in VAT taxes on sales of seafood products from 10 percent to 9 percent. That rate change also applies for imports of seafood, which will be taxed at 9 percent on entry to China. VAT rates are separate from import duty or tariffs.
The VAT rate for services stays unchanged at 6 percent, but China’s government has promised unspecified future relief for providers of food and beverage, transportation, and warehousing services.
Already struggling with debt, China has opted not to repeat previous credit-fueled stimulus measures and is betting that tax cuts will drive the economy on. The latest cut follows a reduction in the processing/manufacturing rate from 17 to 16 percent as of 1 May, 2018. The sales rate (which is applied to seafood) was cut from 11 to 10 percent at the same time.
Separately from its VAT reductions, China is gradually reducing import duties on products it deems vital for the country’s wellbeing – a list that includes seafood and medicines, among other things – to keep supply and prices stable in the domestic market. The country’s recent free trade agreements have taken a similar take in goods China needs while protecting more sensitive local industries.