APAC Tax Matters: 13th edition
At a glance
- Launch of the Value-Added Tax (VAT) Pilot Arrangements for the transportation industry and certain modern service industries
Notice regarding the launch of the Value-Added Tax (VAT) Pilot Arrangements for the transportation industry and certain modern service industries on a nationwide basis (Caishui  No. 37)
The Ministry of Finance (MOF) and the State Administration of Taxation (SAT) jointly released Caishui  No. 37 (“Circular 37”) on 24 May 2013 to announce the launch of VAT pilot arrangements for the transportation industry and certain modern service industries (hereinafter referred to as “VAT Pilot Arrangements”) on a nationwide basis from 1 August 2013. Circular 37 reorganizes, adjusts and refines existing tax policies related to VAT Pilot Arrangements.
Key provisions of Circular 37 are as follows:
|Items||Provisions in Circular 37|
|Scope of VAT taxable services|| |
|Credit of input VAT||Input VAT incurred for motorcycles, automobiles and yachts that are subject to Consumption Tax (CT) and used by original general VAT taxpayers, are allowed to be used to credit against output VAT.|
| Simplified VAT calculation |
General VAT taxpayers may choose to be subject to VAT by a simplified calculation method for income derived from public transportation services.
Further to services related to long distance passenger transportation, shuttles, subway and urban light rails, scope of the public transportation services would be expanded to cover services related to passenger ferry, public passenger transportation and taxi.
|Transitional treatments|| |
The following transitional treatments are abolished:
|Tax reduction/Exemption|| |
For VAT taxable services that are applicable for both zero VAT rate and VAT exemption policies, zero VAT rate shall take priority.
The following services are newly-included in the applicable scope of VAT exemption, unless zero VAT rate applies according to rules stipulated by the MOF and the SAT:
The new VAT pilot policies announced in Circular 37 principally introduce the changes noted below and evidence the efforts of the government to standardize and upgrade the tax system and reduce the burden of taxpayers:
- Clarify the definition of small scale taxpayers, i.e., non-enterprises units that do not frequently provide VAT taxable services can choose to pay VAT as small-scale taxpayers
- Scope of VAT taxable services has been expanded to cover services related to the production, distribution and broadcasting of radio, film and television programs
- Scope of special VAT invoices for input VAT credit purposes should include special cargo business VAT invoices and unified invoices for sales of motor vehicles
- Reduce VAT burden of VAT pilot taxpayers by allowing the credit of input VAT incurred for motorcycles, automobiles and yachts that are subject to CT and used by original general VAT taxpayers
- Enhance preferential tax policies by giving priority to a zero VAT rate when VAT taxable services are eligible for both the zero VAT rate and VAT exemption policies