Tax Alert: China Imposes 6% VAT on Shippers
For those of you who have not been following the story, China undertook a pilot program in Shanghai last year to implement Value Added Tax (VAT) reform. Noting its success, the program was quickly implemented by the government’s Ministry of Finance to extend to the rest of the country. On August 1st, 2013, it will become the law throughout China. So what, you ask? How does this affect me? Read on.
In short, the program replaces much of the old usiness Tax (BT) system in China and replaces it with a Value Added Tax (VAT) on goods and services, including transportation and logistics services. A VAT tax is essentially a tax on consumption. That means that the tax burden is shifted from the supplier of goods and services to the buyer of those goods and services. That’s you. It is effectively a sales tax.
Not to be outdone by their counterparts in Washington, China’s Ministry of Finance has created a mind-numbingly complex document to sift through (Tax Circular Caishui No. 37) regarding the VAT rates applicable to various goods and services. Fortunately for you, we are here to make it easy on you.
The Bottom Line: There will be a 6% increase in costs to shippers importing from and exporting to China on August 1, 2013.
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