A number of tax regulations in China have been updated due to
changes in government policy. To help you understand what these
updates are and how they will affect your organisation, we have
prepared a table summarising them.
What is new?
Decree of SAT
 No. 13
Pilot VAT reform in Shanghai - zero VAT rate on services
The previous Tax Circular Caishui  No.131 provides that if
a Chinese entity located in Shanghai renders international
transportation services, R&D services and designing service to
a foreign entity ("service export"), the Chinese entity
will be entitled to a zero VAT rate. Zero VAT rate means no output
VAT is levied on the revenue of the service and relevant input VAT
may be refunded.
Decree  No. 13 now provides further details.
(1) The VAT refund rate is the VAT levying rate. This means
there will be no VAT cost for the service provider.
(2) The VAT refund for the services can be calculated together
with the VAT refund for export of goods.
(3) The service provider shall make a prior registration with
the competent Shanghai Tax Authority before it can apply for the
VAT refund. For R&D and design services, the Registration
Certificate for Technology Export Contract issued by the
relevant authority of commerce is also required.
(4) The service provider should apply for VAT refund within 15
days of the month after the revenue for the services has been
What is new?
Decree of SAT  No. 12
2011-1-1 to 2020-12- 31
Reduced CIT rate in western China
According to the previous Tax Circular Caishui  No. 58,
encouraged enterprises located in western region of China are
entitled to a reduced CIT rate of 15%. Not only foreign invested
enterprises ("FIEs") but also domestic enterprises can
enjoy this reduced CIT rate. Encouraged enterprises are those
engaging in industries stipulated in the Catalogue of
Encouraged Industries in Western Region. An updated version of
this catalogue is expected to be promulgated soon.
The new Tax Circular has the following main content:
(1) Before the update of the Catalogue of Encouraged
Industries in Western Region, the tax authority can refer to
the Guideline Catalogue for Foreign Investment Industries
to assess if an FIE falls in the encouraged industries.
(2) In case an enterprise located in western region has a branch
located outside of western region, the profits of such branch may
not enjoy the reduced CIT rate.
(3) In case an enterprise located outside of western region has
a branch within western region, the profits of this branch can
enjoy the reduced CIT rate.
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