(CBN Global) April 29 -- China central government has committed to give 50 percent of the value-added tax income to local governments on Saturday. Beijing will start to replace its business tax with value-added tax from May 1 in a move that will eventually see the 30-year old business tax completely phased out.
To replace the business tax with a value-added tax is regarded as the most important tax reform by China's current government since it came to power in 2013. The country hopes to cut taxes by CNY500 billion (USD77 billion) in 2016.
"Value-added tax reform will support the economy and structural adjustment," Chinese vice finance minister Shi Yaobin said in a public speech last week.
This new tax reform will first be implemented across the four industries of finance, real estate, construction and lifestyle services.
Many taxpayers will benefit from the change to a value-added tax as this will lower their overall tax burden arising from lifestyle services consumption, an official from China's State Administration of Taxation said.
Transactions in the second-hand housing market will have the largest impact on individuals. With the change to value-added tax, an individual will pay CNY2,400 (USD370) less tax for a housing unit priced at CNY1 million (USD154,000).
All food and beverage receipts will show both the net and tax amounts after May 1.
Stock and fund investments in China will be exempted from value-added tax.