{"id":4812,"date":"2014-01-22T05:51:22","date_gmt":"2014-01-22T04:51:22","guid":{"rendered":"http:\/\/www.ecovis.com\/focus-china\/?p=1778"},"modified":"2021-09-06T15:01:25","modified_gmt":"2021-09-06T13:01:25","slug":"case-vat-refund-china-deadline-march-31st-2014","status":"publish","type":"post","link":"https:\/\/www.ecovis.com\/focus-china\/case-vat-refund-china-deadline-march-31st-2014\/","title":{"rendered":"Case: VAT Refund China – VAT Reform – Deadline March 31st 2014!"},"content":{"rendered":"

by <\/i>Richard Hoffmann<\/a>, ECOVIS Beijing China<\/a><\/p>\n

\"VAT<\/a><\/p>\n

The deadline for the VAT refund in Beijing is approaching fast \u2013 just 2 months left until\u00a0March 31s<\/sup>t<\/sup><\/strong>, the last day<\/strong> in which companies can apply for it.<\/p>\n

If you haven\u2019t heard of it before, on September 13th<\/sup> 2013, the China State Administration Taxation (SAT) announced the new implementation for cross-border services in its \u201cAnnouncement 52<\/strong>\u201d. Announcement 52 not only set out many administrative and procedural requirements, it also further clarified the VAT exemption for exported services<\/strong>\u00a0that were previously mentioned in Circular 37 (2013)<\/strong>. The best part is that it also outlines how you can recapture the VAT for exported services paid between September 1st<\/sup> 2012 and August 1st<\/sup> 2013<\/strong>. With a usual VAT rate of 6% for services in China this can prove to be quite significant.<\/p>\n

In the past few months, we successfully handled a couple of cases with refunds amounting of several hundreds of thousands of RMB. For the VAT refund, it really depends on the case \u2013 the nature of services exported, the company structure and the kind of contract governing the export.<\/p>\n

In one of our cases a German IT company and its Chinese WFOE subsidiary in Beijing had a service agreement which led to a VAT payment from the German Headquarter to the Chinese WFOE. Thus the Chinese WFOE had to pay 6% VAT when receiving the payment from Germany which it could now try to recapture. In the case of the WFOE providing services to its German headquarter, it is treated as an export of services, and might therefore be eligible for VAT exemption \u2013 and for the refund.<\/p>\n

VAT calculation, for the case, is shown in the following: for every 100,000RMB contractual amount, the German headquarter has to pay 100,000RMB + 6000RMB VAT to its WFOE. The WFOE gets to keep 100,000RMB and has to pay 6000RMB to the tax office in Beijing. If the contractual amount is tax inclusive, the calculation of the tax amount is<\/p>\n

\"Amount<\/p>\n

If the exemption and the refund for this particular service are granted, then the WFOE\u00a0gets a refund for the amount paid between\u00a0September 1st<\/sup>\u00a02012 and August 1st<\/sup>\u00a02013<\/strong>. In addition,\u00a0the WFOE might be exempted from the 6% VAT for similar cases in the future.\u00a0The refund\/exemption does not only work for transactions between a WFOE and its headquarters, but also for service exports to other companies outside of China!<\/p>\n

The WFOE applied for the VAT refund at the tax office, as it fulfilled the following criteria:<\/strong><\/p>\n