China tax update: VAT exemption on cross-border services

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The VAT pilot programme (initially launched in Shanghai on 1 January 2012) provides for VAT exemption for certain qualified cross-border services that are rendered by a service provider in China to an overseas service recipient.

This was later confirmed by Circular Caishui [2013] Number 37 (1 August 2013) expanding the VAT pilot programme on a national level. Since then, taxpayers in China providing relevant services to overseas customers were eager to apply for the VAT exemption. However, local tax authorities in practice were mostly reluctant to approve respective applications due to the lack of detailed implementing rules from higher-level tax authorities.

Finally, on 13 September 2013, the State Administration of Taxation (SAT) has promulgated Bulletin [2013] Number 52 (Bulletin 52) stipulating the long-awaited (trial) measures for VAT exemption on cross-border services. At the local level, Shanghai, Qingdao and Beijing have been among the first to publish local rules…

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