Shanghai Clarifies Value-Added Tax Exemption for Cross-border Taxable Services

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Nov. 6 – The Shanghai Municipal Office of the State Administration of Taxation released the “Announcement on Issues Concerning the Filing of Value-added Tax Exemptions for Cross-border Taxable Services under the Business Tax (BT) to Value-Added Tax (VAT) Pilot Conversion and Tax Settlement during the Initial Pilot Period (Announcement [2013] No.3, hereinafter referred to as ‘Announcement’)” on October 29, which clarifies the following issues for taxpayers within its jurisdiction.

  • Requirements for filing of VAT exemption for cross-border taxable services; and
  • Tax settlement issues during the initial pilot period.

Detailed information can be found below.

Filing Requirements for VAT Exemption

Scenario 1
For provision of the following cross-border taxable services:

  • Project exploration and survey services provided for projects and mineral resources located overseas;
  • Convention and exhibition services provided for conventions and exhibitions held overseas;
  • Warehousing services provided with the warehouses located overseas;
  • Tangible personal property leasing services provided they are used overseas;
  • Publishing and broadcasting services of radio, film, and television programs provided overseas;
  • International transport services operated without the required licenses;
  • Transportation services provided for traveling between Mainland China and Hong Kong, Macau, and Taiwan operated without the required licenses;
  • International transportation services; and
  • Transportation services provided for traveling between mainland China and Hong Kong, Macau and Taiwan, as well as transportation services provided in Hong Kong, Macau and Taiwan.

Taxpayers shall satisfy the following two conditions to be qualified for the filing of VAT exemption:

  • The taxpayers have concluded a written contract for cross-border services with the service recipient; and
  • The taxpayers have obtained income from cross-border services on or after the implementation date of the BT to VAT Pilot Conversion.

Scenario 2
For provision of the following cross-border taxable services:

  • R&D services and designing services;
  • R&D and technology services;
  • Information technology services;
  • Culture and creativity services;
  • Logistics and auxiliary services;
  • Certification, authentication and consulting services;
  • Production services of radio, film and television programs;
  • Time charter services for ocean transportation;
  • Voyage charter services for ocean transportation;
  • Wet lease for air transportation; and
  • Advertising services publicized overseas.

Taxpayers shall satisfy the following two conditions to be qualified for the filing of VAT exemption:

  • The cross-border services are provided to overseas entities; and
  • The income from cross-border services are obtained from overseas.

Taxpayers applying for tax exemption for cross-border services shall go through the filing formalities with the competent tax authorities prior to the VAT declaration for the current period. Taxpayers failing to do so cannot enjoy VAT exemptions starting from November this year.

Tax Settlement
Pilot taxpayers that have obtained income from cross-border services from January 1, 2012 to October 31, 2013 shall submit the tax settlement materials to the competent tax authority before December 31, 2013, and go through the relevant tax settlement procedures.

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