To the Housing and Urban-Rural Development Departments of all provinces, autonomous regions and municipalities directly under the Central Government, and relevant departments of the State Council:
In order to meet the needs of replacing business tax with VAT in the construction industry, our Ministry has organized a special study on the impact of the VAT reform on project costs and pricing bases, and has asked some provinces and municipalities to conduct tests, forming adjustments to the various cost components of project costs and the tax calculation method. The notice on preparatory work for adjusting project pricing bases is as follows.
1. To ensure the smooth adjustment of project pricing bases after the VAT reform, all regions and departments shall re-determine the tax calculation method and make preparations for adjusting pricing bases such as project pricing quotas and price information.
2. Based on the results of preliminary research and testing, project costs may be calculated according to the following formula: Project cost = pre-tax project cost × (1+11%). Among them, 11% is the proposed VAT rate for the construction industry. Pre-tax project cost is the sum of labor costs, material costs, construction machinery and tool use fees, enterprise management fees, profits and regulatory fees. All cost items are calculated at prices that do not include deductible input VAT, and the corresponding pricing bases shall be adjusted according to the above method.
3. Relevant regions and departments may, based on the actual situation of pricing base management, adopt other adjustment methods that meet the requirements of project pricing under VAT.
All regions and departments shall attach great importance to this work, strengthen leadership, take measures, and complete the preparatory adjustment of pricing bases before the end of April 2016. Relevant opinions and suggestions during the preparatory adjustment work shall be promptly fed back to the Department of Standards and Quotas of our Ministry.