Beijing Chaoyang Tax Bureau Accepting VAT Exemption Filings Until Year-End

December 27, 2013 Posted by China Briefing Reading Time: 4 minutes

Dec. 27 – Since the release of Announcement 52 in September by China’s State Administration of Taxation, Beijing Chaoyang taxpayers have been eagerly awaiting the chance to secure VAT exemption for qualifying services provided to overseas consumers – and to obtain refunds of VAT paid since 2012 when reform was first initiated.

In a show of good holiday cheer, Beijing Chaoyang responded the day after Christmas by announcing that it would accept VAT exemption filings until the end of the year. Taxpayers have scrambled to collect relevant supporting documentation for such filings. Unfortunately, some taxpayers are foreign-invested enterprises whose leadership has left Beijing to spend Christmas and the New Year with family. The Chaoyang district is regarded as the home of the most foreign invested enterprises in Beijing.

Since the release of Announcement 52, the only Beijing districts to accept filings for VAT exemption for qualifying cross-border services have been Haidian and Yizhuang – Beijing Chaoyang is now the third.

Since Chaoyang district is home to an inordinate number of foreign invested enterprises, many of which provide qualifying outsourced services to their foreign headquarters, it is perhaps understandable that Chaoyang has been reluctant to implement an exemption and refund policy that could significantly impact its tax revenue. Relatively limited staffing to handle the filings and applications may also be another factor – Chaoyang district tax offices typically have three or less employees to manage the receipt of such filings.

Despite Haidian and Yizhuang’s prompt response to Announcement 52 when released in September, even Haidian and Yizhuang’s tax authorities have acted with a certain reserve. All such filings are actually only self-declarations that the taxpayer qualifies for exemption, and the risk of mis-declaration remains solely with the taxpayer.

Furthermore, both districts have hitherto refused to accept applications for VAT refunds which would be retroactively effective to September of 2012, when VAT pilot reform was first initiated in Beijing, even though such refunds are mandated under Announcement 52. The implementation of such retroactive refunding is effectively on hold until 2014 or later, including the related recovery of input VAT previously expended to offset output VAT on prior exempt transactions.

Beijing Chaoyang authorities have suggested that if taxpayer filings are not received before the end of the year or otherwise filed promptly, then VAT exemption for these transactions could potentially be delayed or even waived. The opportunity to apply for a retroactive refund of VAT and restoration of already expended input VAT on exempt transactions could also potentially be delayed or waived.

For those VAT taxpayers still in Beijing and willing to try to meet the year-end deadline, the VAT exemption filing documents that will satisfy the Chaoyang, Haidian, and Yizhuang districts of Beijing are a qualifying cross-border services agreement, the incorporation certificate of the foreign entity consuming the services (each of which must be translated into Chinese) and also often the relevant invoices, bank payment receipts, and other supporting documents.

Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.

For further details or to contact the firm, please email asia@dezshira.com, visit www.dezshira.com, or download the company brochure.

You can stay up to date with the latest business and investment trends across Asia by subscribing to Asia Briefing’s complimentary update service featuring news, commentary, guides, and multimedia resources.

Related Reading

The China Tax Guide: Tax, Accounting and Audit (Sixth Edition)
This edition of the China Tax Guide, updated for 2013, offers a comprehensive overview of the major taxes foreign investors are likely to encounter when establishing or operating a business in China, as well as other tax-relevant obligations. This concise, detailed, yet pragmatic guide is ideal for CFOs, compliance officers and heads of accounting who need to be able to navigate the complex tax and accounting landscape in China in order to effectively manage and strategically plan their China operations.

Value-Added Tax Reform
VAT reform is a confusing transition for many and introduces a number of additional questions, such as exactly what types of input VAT are now deductible. Confusion about the new laws may also allow opportunistic companies to charge higher prices and blame the increase on the tax reform. To add some clarity to the issue – and VAT in general – this issue of China Briefing takes a look at a number of VAT-related questions.