Tax Alert – CHINA : NEW 6% of VAT on Logistic & Forwarding services

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July 24, 2013  |   Blog,Flash info   |     |   Comments Off on Tax Alert – CHINA : NEW 6% of VAT on Logistic & Forwarding services

State Administration Of TaxationTax Alert China : NEW VAT on Logistic & Forwarding Services

For your information, the Chinese Government is expending 6% of Value-Added Tax (VAT) to logistics & freight forwarding services with effective on 1 Aug. Here is the information for your easy reference :

The China Ministry of Finance (MOF) and State Administration of Taxation (SAT) issued a circular (Caishui [2013] No. 37, (“Circular 37”)) on May 24, 2013, announcing the expansion of the Value-Added Tax (VAT) Reform Pilot on a nationwide basis.  Certain revisions to the pilot regulations in this nationwide application of the VAT program will result in a 6% VAT charge assessed on transportation charges and freight forwarding services billed and paid in China.

The VAT reform pilot program for the transportation sectors started in Shanghai on January 1, 2012 and subsequently expanded to eight other cities/provinces during 2012.   The People’s Republic of China (PRC) State Council determined in April, 2013 that the limited application of the VAT pilot distorted competition, and called for the nationwide application of the VAT program.   Unfortunately, the guidelines for nationwide VAT implementation abolished certain policies existing under the VAT pilot.

Under the VAT pilot, forwarders and other transportation providers could effectively invoice international transportation and freight forwarding services as “VAT Inclusive” – without billing the VAT to client shippers.  Circular 37 prohibits this practice and effective August 1, 2013, the 6% VAT will be collected from clients on Air and Ocean freight charges payable within the PRC.  The 6% VAT will be collected on behalf of and remitted to, the government.

It is important to note that the 6% VAT affects all transportation costs, freight forwarding charges and related service and handling fees payable within the PRC on or after August 1, 2013.

As airlines, terminal, trucker and all related parties will add this 6% VAT on top the current offer, we would recommend customer to have their orders shipped before 1 Aug to avoid the VAT.

(Sources) State Administration of Taxation CHINA :

Thanks a lot and we look forward to hearing from you soon.

ATC Airfreight

ATC-Air Time Critical Dept.

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