On June 3, the first value-added tax (VAT) invoice in the telecom sector in Shanxi province was issued by Xinyutong Digital Technology Co., Ltd, in Taiyuan, the province’s capital city. It means that branches of China’s three major telecom operators - CMCC, CUCC and CTCC – in Shanxi, along with their affiliated enterprises, have entered into a new era in taxation.

China expanded a pilot reform to replace the business tax with a value-added tax in the telecom sector on June 1. The business tax rate in the telecom sector was 3 percent. But now, basic telecom services such as voice calls and rental or sales of bandwidth will be subject to an 11 percent VAT while value-added services such as video calls, call forwarding, and multimedia message (MMS) will be subject to a 6 percent rate.

“The reform program will exert beneficial influence on the development of the telecom sector, though the tax burden may be a little bit serious because of the insufficient input tax deduction at the beginning,” said Sun Weidong, vice president of China Mobile Shanxi Branch. As telecom services are widely used, enterprises that buy telecom services after the reform program can get input tax deductions. Moreover, in the long term, the deductibility of the input tax will gradually increase with the growing enterprise investment.

Zhang Youqian, deputy director of the Shanxi Provincial Office, said that as an important producer service sector, the telecom sector is closely related to all others in society. The reform program will instill new vitality into the development of service sectors and industrial upgrading in the province by optimizing the policy of VAT deduction to relieve the tax burden for the whole industry.

The provincial fiscal and taxation departments will help ensure that taxpayers using telecom services provided by the three major telecom operators in Shanxi can issue the VAT invoice starting on June 1 and make tax declaration by July 1.