(Yicai) Sept. 7 -- China will allow advanced manufacturing firms to take advantage of a new tax break, easing the burden of input value-added tax on these critical businesses.

Advanced manufacturers can deduct an additional 5 percent from the input VAT between Jan. 1 this year and Dec. 31, 2027 to set against the VAT payable, the Ministry of Finance and the State Taxation Administration said yesterday. If the deductible amount cannot be used during the period, it can be carried over to the next, they added.

VAT is the single biggest tax source in China, and the taxable amount is calculated by subtracting the input VAT from the output VAT. Previously, the preferential tax policy was applied to producer and daily life service businesses, with ratios of 5 percent and 10 percent, respectively.

The move is equivalent to directly cutting the operating costs of advanced manufacturing firms, and will reduce their VAT burden by about 20 percent, Tian Zhiwei, deputy dean of the Institute of Public Policy and Governance of Shanghai University of Finance and Economics, told Yicai.

The tax break will help both profitable and loss-making companies, Tian pointed out. Those with a narrower profit margin will receive a higher tax cut, while those with a wider margin will see a smaller tax reduction, he noted.

Editor: Martin Kadiev