The new Detailed Rules of the Provisional Regulations on Value-added Tax of the People’s Republic of China (the “VAT Rules”) and the new Detailed Rules of the Provisional Regulations on Business Tax of the People’s Republic of China (the “Business Tax Rules”) were issued by the Ministry of Finance and the State Administration of Taxation on October 28, 2011 and will become effective as of November 1, 2011.

According to the VAT Rules and the Business Tax Rules, the minimum thresholds of the Valued-added Tax (the “VAT”) and the business tax are increased. The specific rules are as follows:

The scope of the increased minimum threshold of VAT:

Items	Scope of the Minimum Threshold
Sales of Goods	Monthly sales amount equals RMB 5,000 to RMB 20,000.
Sales of Taxable Services	Monthly sales amount equals RMB 5,000 to RMB 20,000.
Transaction-by-Transaction	The sales amount of per transaction or per day equals RMB 300 to RMB 500.

The scope of the increased minimum threshold of business tax:

Ways of the Payment	Scope of the Minimum Threshold
Periodical Payment	Monthly turnover equals RMB 5,000 to RMB 20,000.
Transaction-by-Transaction	The turnover of per transaction or per day equals RMB 300 to RMB 500.

Conclusion

Compared to the previous regulations in this regard, the minimum thresholds of both VAT and business tax have been increased, which means a reduction of the tax burden over enterprises, especially the “mini” and small enterprises whose tax to be paid will be substantially influenced by the threshold changes. These new rules are regarded as part of structural tax reduction of the taxation reform of China, which aims to further reduce the tax burden of the enterprises and promote their development.