Aug. 27 – China’s State Administration of Taxation released the “Administrative Measures on Tax Exemptions and Deductions for Taxable Services Subject to the Zero Value-Added Tax Rate (SAT Announcement  No. 37, hereinafter referred to as the ‘Measures’)” on August 7, which clarify the scope of taxable services subject to zero-rated value-added tax (VAT). Detailed information can be found below.
According to the Measures, tax exemption, reduction and rebate measures shall apply to the taxable services provided by entities or individuals satisfying the following conditions:
- The entities or individuals are engaged in the provision of taxable services subject to zero VAT rate within China;
- The entities or individuals have been identified as general VAT taxpayers; and
- The taxable services provided by the entities and individuals are subject to the general VAT calculation method.
However, such entities or individuals shall not issue VAT invoices for the taxable services they provide.
International transportation services
- Passenger or cargo transportation from home to abroad;
- Passenger or cargo transportation from abroad to home; and
- Passenger or cargo transportation services provided abroad.
However, transporting passengers or cargo in the following ways shall not be regarded as international transportation services:
- Transporting passengers or cargo from any place in China to domestic zones and places under special customs supervision; and
- Transporting passengers or cargo from domestic zones and places under special customs supervision to other areas of China or other domestic zones under special customs supervision.
Hong Kong, Macau and Taiwan Transportation Service
- Transportation services to and from Hong Kong, Macau and Taiwan
- Transportation services provided in Hong Kong, Macau and Taiwan
Provision of R&D and design services to overseas entities
R&D services refer to the business activities involving the research and experimental development of new technologies, new products, new processes or new materials and the related systems.
Design services refer to business activities that convey plans, schemes and ideas in visual or textual forms. Specifically:
- Industrial design
- Style design
- Costume design
- Environmental design
- Graphic design
- Package design
- Animation and cartoon design
- Exhibition design
- Web design
- Machinery design
- Engineering design
- Creative planning
However, such tax exemption, deduction and rebate measures are not applicable to the activities of providing R&D and design services to entities in domestic zones under special customs supervision.
Current tax exemption, deduction or rebate amounts for taxable services subject to zero VAT rate shall be calculated as following:
- Current tax exemption, deduction or rebate amounts for taxable services subject to zero VAT rate = current taxable value of tax exemption, deduction or rebate for zero-rate taxable services x RMB exchange rates x rebate rates of taxable services subject to zero VAT rate
The Measures are retroactively effective from August 1, 2013.
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