The pilot VAT program put in place in January 1, 2012 was expanded nationally on August 1, 2013. The long-awaited administrative measure on VAT exemption for cross border services would now allow companies in China to follow the prescribed procedures to obtain VAT exemption on previously non-zero-rated service revenue from cross-border international transportation and “modern services” within the scope of the pilot VAT program.

Services that may benefit from this new administrative measure include R&D and design services provided to foreign service recipients.

Certain services such as consultancy services in respect of immovable properties or goods located in China are fully subject to VAT even if provided to foreign service recipients.

Services such as exhibition and advertising services are VAT exempt only if performed overseas and regardless of whether the service recipient is Chinese or foreign.

International transportation services are either zero-rated or VAT exempt depending on whether the service provided is a general VAT taxpayer with relevant licenses or a small-scale VAT taxpayer.

Zero rating means that service provider in China does not have to charge output VAT on cross-border services and also can apply for a refund of its related input VAT. Read More