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Nov 2015, Issue 45

New opportunities arising from expanded scope of zero-rated VAT preferential treatment to certain exported services


Recently, the Ministry of Finance (MOF) and the State Administration of Taxation (SAT) jointly issued Circular Caishui [2015] No.118 (Circular 118) to expand the zero-rated VAT preferential treatment to certain eligible exported services, including cinema/television services, technology transfer services, software services and offshore outsourcing services, etc. Meanwhile, Circular 118 also clarifies the measures for manufacturing enterprises and trading enterprises to apply for the VAT exemption/refund treatment.

Circular 118 expands the scope of zero-rated VAT services, which should reduce the VAT effective tax burden and cost of the relevant enterprises. However, enterprises should also pay attention to the compliance requirement, calculation and filing requirement of the zero-rated VAT policy. Relevant enterprises engaging in the export of services with small amount of input VAT would need to assess whether or not to apply for the zero-rated VAT preferential treatment, by taking into account the future changes in their operations as well as the development of the Business Tax (BT) to Value Added Tax (VAT) Transformation Pilot Program (B2V reform).

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