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China zero’s VAT on delivery services

Stringent COVID-19 lockdowns lead to VAT break

The Chinese Ministry of Finance and State Taxation Administration have confirmed that delivery services will be zero-rated between 1 May and 31 December 2022.  This will cover express delivery services of household essentials, aimed at providing some support to people isolating at home.

The country continues to impose tough lockdowns as it seeks to eliminate COVID-19 outbreaks. Locations including Shanghai and Changchun have been particularly hard hit with economic activity collapsing  to their lowest level since February 2022.

Last month, China VAT credits repayment were accelerated to help support the economy as growth slows to near 5%, and it withdrew 3% VAT rate on small enterprises.

This tax support is being rolled out following worries around COVID-19 outbreaks and the slowing economy. In April, China set it’s 2022 growth target at 5.5%, the lowest since 1991. The effects of the ongoing COVID-19 shutdowns and property price collapse have been the main causes.

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