Merging of state and local tax bureaus

Beijing announced on 20 July 2018 the merger of the county/district-level state and local tax bureaus across China. This signalled the final stages of reforms of China’s tax administration to merge the state tax bureaus with the corresponding local tax units into a consolidated local tax authority.

Since 1994, state and local tax bureaus have existed in parallel at the provincial, municipal and county/district levels in places other than Shanghai and Tibet. State tax bureaus were responsible for collecting taxes for the central government such as the consumption tax, as well as certain taxes, such as enterprise income tax (EIT) and value-added tax (VAT), shared between the central and local governments. Local tax bureaus were responsible for the collection of local taxes, such as deed tax and land appreciation tax, as well as some other taxes, such as individual income tax (IIT), shared between the central and local governments.

In March 2018, China started reforms to merge corresponding state and local tax bureaus into a consolidated local tax authority. It announced the provincial-level merger on 15 June 2018, the municipal-level merger on 5 July 2018, and the county/district-level merger on 20 July 2018.

After the merger, the new local tax authority will assume all functions that the corresponding state and local tax bureaus previously performed. The local tax authority will follow directives from both the State Administration of Taxation (SAT) and local governments, with the SAT playing the leading role. Necessary internal arrangements, such as personnel adjustments, will be made to enable the local tax authority to function properly. Also, new procedural guidance will be issued so that taxpayers can fulfil tax formalities with the new local tax authority.

Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by e-mailing Danian Zhang (Shanghai) at danian.zhang@bakermckenzie.com