China Releases Circular on Taxable Services Scope of VAT Reform

Dec. 11 – China’s Ministry of Finance and the State Administration of Taxation released “The Supplementary Circular on the Scope of Taxable Services and Several Other Tax Policies in the Pilot Collection of Value Added Tax (VAT) in Lieu of Business Tax in the Transportation Industry and Certain Modern Services Industries (caishui [2012] No. 86, hereinafter referred to as the ‘Circular’) on December 4, which clarifies a collection of relevant tax policies regarding the VAT reform in its target industries. Detailed information can be found below.

Relevant tax policies regarding the VAT reform in the transportation industry and certain modern services industries are hereby announced as follows:

• For architectural drawing review services, environmental assessment services, and medical malpractice appraisal services: The VAT thereof shall be levied in accordance with “attestation services”
• For bookkeeping agency services: The VAT thereof shall be levied in accordance with “consulting services”
• For text print and blueprint services: The VAT thereof shall be levied in accordance with “design services”
• For services related to the organization and arrangement of conferences or exhibitions: The VAT thereof shall be levied in accordance with “conference and exhibition services”
• For port facility security fees charged by port facility operators: The VAT thereof shall be levied in accordance with “port services”
• For network operation services provided by websites for non-proprietary online games: The VAT thereof shall be levied in accordance with “information system services”
• For management fees collected by taxi companies from taxi drivers: If the taxicabs belong to taxi companies, the VAT thereof shall be levied in accordance with “land transportation services,” but no VAT would be levied if taxicabs belong to the taxi drivers
• For transportation service to and from (or within) Taiwan, Hong Kong and Macao provided by pilot taxpayers within the pilot area: A zero VAT rate shall apply

The Circular is retroactively effective from December 1, 2012.

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