State Administration of Taxation Announcement No. 49

On 27 August 2014 China’s State Administration of Taxation issued Announcement No.49 of 2014 (“SAT Announcement 49”) which is a comprehensive statement of the policies for claiming exemption from Value-Added Tax (“VAT”) under the VAT pilot program in China for exported services. SAT Announcement 49 will become effective from 1 October 2014.

The categories of zero rated exported services (entities or individuals in China provides service to overseas) in China is currently limited to research and development services, design services, and certain international transportation services provided by Chinese domestic carriers. Where taxpayers are eligible for both VAT zero rated treatment and exemption for research and development, design and international transportation services, the taxpayer is permitted to claim VAT exemption if he chooses to give up the zero rated treatment.

The VAT exemption exported service has a broader category, we summarize the categories of services and conditions for the VAT exemption as below.

Telecommunication services

  • Telecommunications services (both basic and value-added) (i.e. global roaming) provided by Chinese entities to overseas entities

Cultural and creative services

  • Trademark and copyright transfer services, intellectual property services provided to overseas entities
  • Convention and exhibition services located outside of China
  • Advertising services where the related advertisement is released outside of China

Logistics and ancillary services

  • Logistics and ancillary services provided to overseas entities (except warehousing services)
  • Warehousing services where the location of the warehouse is outside of China

Radio, film and television services

  • Production of radio, films and television programs for overseas entities
  • Broadcast and distribution of radio, films and television programs outside of China

Information technology services

  • Software services, circuit design and testing services, business process management services provided to overseas entities

Research and development and technical services

  • Technology transfer and technology consulting services provided to overseas entities
  • Engineering or exploration services with the related project or mineral resources located outside of China
  • Energy management services (except where the object of the energy management contract is located in China) provided to overseas entities

Postal services

  • Postal and courier services where the related goods are exported out of China or consumed entirely outside of China

Leasing of tangible movable property

  • Leasing of tangible movable property where the asset is being used outside of China

Certification and consulting services

  • Certification, verification and consulting services provided to overseas entities (except for services in relation to goods or immovable property located in China

Transportation services

  • Unlicensed international transportation