# 2013/8 September 2013

Increased VAT recovery due to latest regulation update Key points

Contacts

»

Since August 1 , 2013, the Value Added Tax (“VAT”) reform is implemented in China nationwide

»

VAT recovery now also possible for broadcasting, film and TV industry

»

Confirmation of VAT refund for trading companies

Shanghai Hongxiang Ma Partner [email protected] +86 21 5047 8665 Hong Kong Claus Schuermann Partner [email protected] +852 2528 1229

st

Germany Karsten Gnuschke Partner [email protected] +49 89 28646 139

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# 2013/8 September 2013

1) Background th

On May 24 , 2013, China’s Ministry of Finance (“MOF”) and the State Administration of Taxation (“SAT”) issued Caishui [2013] No.37 (“Circular 37”), which stipulates that the VAT reform pilot program will be rolled st out nationwide from August 1 2013 onward. In addition, further service industries are now covered by the VAT reform.

2) Salient Points of Circular 37

» Broadcasting, film and TV services now covered by the VAT reform Circular 37 further covers the radio, film and television production, broadcasting and distribution. The VAT rate applied is 6%.

» Clarification regarding the tax treatment of zero-rated services Usually, trading companies apply the “exemption and refund” method for the export of goods. However, for the provision of zero-rated services, the previous regulation Caishui [2011] No.131 (“Circular 131”) did not clearly indicate, if trading companies shall also apply such refund method for the provision of zero-rated services or if they shall apply the “exemption, credit and refund” method. Circular 37 makes this issue much clearer and clarifies that the “exemption and refund” method should also be applied for the provision of zero-rates services by trading companies.

» Regulation Update Except for certain adjustments with regard to some previous regulations, Circular 37 basically contains the same provisions as stated in Caishui [2011] No.111. Circular 37 abolishes a series of former st regulations as of August 1 2013:       

Caishui [2011] No.111 Caishui [2011] No.131 Caishui [2011] No.133 Caishui [2012] No.53 Caishui [2012] No.71 Caishui [2012] No.86 Item 16 and Item18 of Article 3, Caishui [2003] No.16

3) Conclusion With the nationwide roll-out of the VAT reform, taxpayers are now able to obtain special VAT invoices across China. Thus, a much wider input VAT recovery is possible, reducing tax cost for doing business in China. Additionally, the widened scope of the VAT reform now also includes broadcasting, film and TV Page 2 of 4

# 2013/8 September 2013

services. Since the nationwide VAT-reform is however still at an early stage, we recommend to stay informed about the local implementation status and local procedures with your in charge tax authority.

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# 2013/8 September 2013

Author

Contact

WTS Consulting (Shanghai) Ltd. Unit 031, 29F, Hang Seng Bank Tower 1000 Lujiazui Ring Road Pudong New Area, Shanghai 200120 PRC Tel: +86 21 5047 8665 Fax: +86 21 3882 1211 www.wtscn.cn [email protected]

Shanghai Hongxiang Ma Partner [email protected] +86 21 5047 8665 Hong Kong Claus Schuermann Partner [email protected] + 852 2528 1229 Germany Karsten Gnuschke Partner [email protected] + 49 89 28646 139

Disclaimer The above information is intended for general information on the stated subjects and is not exhaustive treatment of any subject. Thus, the content of this Infoletter is not intended to replace professional tax advice on the covered subjects. WTS Consulting (Shanghai) Ltd. cannot take responsibility for the topicality, completeness or quality of the information provided. None of the information contained in this Infoletter is meant to replace a personal consultation. Liability claims regarding damage caused by the use or disuse of any information provided, including any kind of information which is incomplete or incorrect, will therefore be rejected. If you wish to receive the advice of WTS Consulting (Shanghai) Ltd., please make contact with one of our advisors. All copyright is strictly reserved by WTS Consulting (Shanghai) Ltd.

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