Effective August 1, 2013, China will levy a 6% value-added tax (VAT) on logistics services in an effort to balance out China’s economy and boost its services sector.The VAT is considered a tax cut for Chinese companies when compared to the formally used Business Tax. The 6% VAT will apply to all ocean freight, air freight, and auxiliary logistics charges payable in China, including origin handling and freight paid in China.
To strengthen its tax system, China has replaced its Business Tax with a Modern Value-Added Tax. The major beneficiaries of the reforms are manufacturers, wholesalers, retailers, and importers of goods in that the buyer of the goods is responsible for the VAT, not the supplier. The VAT shifts the taxation to the importers and exporters and alleviates the burden from the Chinese airlines and ocean carriers. U.S. companies importing or exporting to or from China should expect to pay the 6% VAT on every shipment on top of all ocean freight, air freight, and other auxiliary logistics services provided in China. The 6% VAT will be incurred for transportation/logistics services to bring goods from the factory to either the airport or the seaport. We estimate the VAT to be less than $50 per container coming from or going to China.
Taxable Services:
– Land transportation – road/rail transport
– Marine transportation – river, lakes, maritime transport
– Air transportation – air-routed transport
– Logistics support – port services, freight forwarding, customs clearance, warehousing, loading and unloading services
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