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US Hopeful Of Resolution Over Chinese VAT On Shipping

by Mike Godfrey, Tax-News.com, Washington

17 December 2013


Commissioner William Doyle of the US Federal Maritime Commission (FMC) provided an update on December 11, 2013, on consultations held with China over the impact on international shipping firms of the expansion of China's value added tax regime to cover shipping services on August 1, 2013, on the basis of Circular 37/2013.

Doyle reported that during these consultations the US delegation highlighted that foreign shipping companies were newly subject to a 6 percent tax on freight collected; an increase in the tax burden for foreign businesses in China.

He recalled that the US delegation had pointed out that there are no complaints about China's transition from a business tax to a VAT, but that the United States "has questions as to the fair application of the tax with regard to international maritime transportation."

Doyle said: "I raised the concern that the United States's interests should be treated fairly under China's new VAT tax regime. I also expressed the business community's desire for clarity and certainty with respect to the VAT. In this regard, the business community is interested in learning more about potential refunds if there is an overpayment of taxes; and their concern over any consequences of an inadvertent underpayment of taxes and the possible penalties that they may incur as a result."

"The Chinese representatives listened to our concerns and committed to continue working with the State Administration of Taxation and other government agencies within China in order to seek more guidance and clarity on the VAT. I committed that the FMC would work with the appropriate US agencies, private sector interests and representatives of China with the goal of securing more guidance and clarity in this regard."

Doyle revealed that, this week, shipping industry contacts have communicated to the State Department that China is preparing a new circular. "According to the report, the Ministry of Finance (MOF) and State Administration of Taxation would jointly issue a circular to address the issues in the transportation and logistics sector. It is anticipated that the circular would be released very shortly."

"According to the State Department, any guidance and clarification provided with respect to the VAT circular would have a retroactive application to August 1, 2013," he said. Concluding: "A public announcement by Chinese authorities has not been made as of yet. That said, I am encouraged that the concerns raised by the Federal Maritime Commission on behalf of the maritime industry and stakeholders appear to be receiving due consideration by the People's Republic of China."

TAGS: Finance | VAT rates | tax | business | value added tax (VAT) | interest | China | United States | regulation | penalties | services | VAT goods & services classification | Tax

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