Merger of business tax into VAT in China

With effect from 1 January 2009, the scope of a local experiment to allow businesses to deduct VAT in respect of the purchase of equipment was extended to all businesses nationwide. According to the legislative plan, the congress will adopt a VAT Law within five years. In the framework of that reform, one of the main issues is the relationship between VAT and business tax. The final result seems clear: in the future, business tax will merge into VAT.