By Wang Gang & Chen Daofu, Research Team on “VAT Collection on Asset Management Products”, Research Institute of Finance, DRC

Research Report, No.163, 2017 (Total 5238) 2017-11-30

Abstract: Against the background of VAT (value-added tax) for business tax reform in the financial sector, the Ministry of Finance and the State Administration of Taxation have issued a series of documents, making it clear that VAT will be collected on asset management products since January 1, 2018. Relevant research findings show that the financial and taxation departments and asset management sectors hold quite different views on VAT collection on asset management products. It is found that the present regulation of VAT collection on asset management products will greatly increase the tax burden of the asset management sectors, exert a negative influence on institutional investors to improve the proportion of direct financing, and may lead to large fluctuations in financial market at the turn of the year. Besides, the regulation of VAT collection on asset management products are not consistent with the principal arrangements of VAT collection. Efforts need to be made to flesh out the present VAT regime relating to asset management products in a prudent and reasonable manner and in line with the basic principle of VAT. Besides, VAT charges may be made on financial services provided by various asset management institutions according to VAT for business tax arrangements. With regard to the earnings generated in the operation of asset management products, VAT may be exempted and when conditions become mature, the collection of capital gains tax on investors may be implemented.

Key words: VAT for business tax, asset management sectors, asset management products, value-added tax, policy options