Businesses and individuals providing taxable goods and related processing services or who import into mainland China are liable to VAT. These changes may no longer produce any real benefit in applying a ‘net basis’ method to transport services they procure or arrange. A key issue which arises from these changes is the impact on business travel. The VAT credit balance must have grown incrementally for 6 consecutive months (or two consecutive quarters, for those who file on a quarterly basis), starting from April 2019; The VAT credit balance must have grown by not less than RMB 500,000  over that same 6 month period; The taxpayer’s tax credit rating must be an “A” or “B” (which effectively denotes them as being highly compliant taxpayers); The taxpayer cannot have had cases of fraudulent refund claims, false issuance of special VAT invoices or tax evasion penalties (no more than twice), within the 3 year period preceding the applicable tax refund; The taxpayer has not benefited from the VAT refund upon collection and VAT refund after collection policies from 1 April 2019; The refunds which are provided are only those incrementally accruing from 1 April 2019 – in other words, VAT credit balance amounts prior to 1 April 2019 are effectively quarantined and cannot be refunded; The refund which is eventually allowed represents 60% of the incremental VAT refund available while only input VAT credits supported by special VAT invoices, customs clearance certificates, or tax clearance certificates for imported services can be refunded. Chinese Consumption, City Maintenance & Education Taxes. Importers note that their domestic competitors often fail to pay taxes. allowing input VAT credits for transportation services, which necessitate changes to corporate reimbursement policies. The reforms were designed to: simplify compliance; reduce double taxation; encourage outsourcing and boost local consumption as the country moves away from an export-led economy. Significant changes were recently made to the rules for the zero-rating of export sales. To find out how much you'll need to pay, you'll need to check the commodity code for umbrellas, and apply the import … The rise in export tax rebates will "help reduce costs for the real economy, help it cope with the complex international situation … Employers will need to be able to configure their systems and processes so as to differentiate: One further key consequence of these changes is on travel agents and transportation service providers. It is more usual in China for non-resident traders to form a local company (e.g. {{vm.newUser1}} 2.1. Find out how KPMG's expertise can help you and your company. Our privacy policy has been updated since the last time you logged in. Instead, excess input VAT credits may only be carried forward to be used to offset output VAT in future tax periods. China’s State Council, Ministry of Finance (MoF), the State Taxation Administration (STA) and General Administration of Customs (GAC) released new VAT policies and implementation rules which  significantly progress China’s efforts to better align its VAT rules with OECD principles. Payroll tax on wages in lieu of VAT for non-profit organisations: 17% Payroll tax on wages in lieu of VAT for financial institutions: 0%: Zero: Exports; some tourism services; sale of fruit and vegetables: 0%: Exempt: Financial services, certain real estate sales and leasings, diamonds and precious metals, not-for-profit … Goods which are zero-rated on sale within the State (for example, most food, children’s clothing and printed books) are zero-rated at importation. Many goods and services are subject to 16% VAT, but there are four rates in total, as well as nil-rating. In particular, while exports of goods are not subject to output tax, the supplier is potentially not eligible to claim full input VAT credits for its associated costs, such as raw materials and other consumables used in producing the goods being exported.