SHANGHAI ISSUES IMPLEMENTATION RULES ON VAT EXEMPTION FOR EXPORT SERVICES
KEY HIGHLIGHTS OF ANNOUCEMENT 3:
- Releases implementation rules concerning requirements and procedure for the filing of VAT exemption for export services
- Offers solutions for the clearance of VAT already paid during VAT pilot period, i.e., Jan 1, 2012 to Oct 31, 2013 for export services in Shanghai.
On October 29, 2013, the Shanghai Municipal Tax Bureau released detailed implementation guidelines regarding filing for Value-Added Tax (“VAT”) exemption under Announcement 3 . Announcement No. 3  follows the previous Announcement 52  which was issued by China’s State Administration of Taxation (“SAT”) on September 29, 2013 providing similar guidelines for the implementation of VAT exemption filing for export services.
This newsletter will discuss the implementation rules under Announcement 3 into two parts:
- Application requirement and procedure for the filing of VAT exemption
- Procedure for settlementof VAT that was paid during the VAT pilot period for export services in Shanghai.
Filing of VAT exemption for export services
Services eligible for VAT exemption:
Procedure for filing of VAT exemption:
Requirements to claim VAT exemption:
At the time of claiming VAT exemption, the service provider will need to submit the following documents to the tax authorities:
- The original and photocopy of cross border service contract.
- The service contract must be in writing. If the contract is in foreign language, Chinese translation will be required. Contract cannot be an open contract with no information about quantity and price.
- A cross border taxable service tax recordal filing form as per the format provided by the local tax bureau issued at the time of release of announcement 52.
- List all the contracts filing information in a Statistic sheet
- The original and photocopy of the service receiver ID certificate, such as registered license that can prove the service recipient entity is located overseas.
- Accounting entryrelated to cross border service revenue.
- Accounting entryrelated to non-deductible input VAT corresponding to the cross border service revenue.
Please be advised that there must be revenue generated with respect to VAT exemption services from Jan 2012 onwards and a separate account for taxable income and exempted income must be maintained. Further, no special VAT invoice will be issued by the service provider and thus, no input VAT credit can be claimed by the service recipient corresponding to tax exemption service.
Settlement of VAT already paid during previous VAT pilot period
Pilot taxpayers who have already paid VAT for the period between Jan 1, 2012 and Oct 31, 2013 can apply for VAT settlement. The pilot taxpayers have just one month till the end of Dec 2013 to apply for 1 year and 10 months of VAT exemption and tax clearing.
Clearance of the VAT paid must be finished by the tax bureau before Feb 28, 2014. If the taxpayers do not apply for VAT exemption and clearance for the previous period by Dec 31, 2013, they may lose their chance of enjoying VAT exemption. For clearance request for the period from Jan 1, 2012 to Oct 31, 2013, the company should submit all the exemption revenue information to the in-charge tax bureau.