Import Tax and VAT on Equipment in China: Update
Towards year end of 2008, the PRC Government announced the repeal of the tax incentive allowing for the importation of equipment free of duty and VAT for encouraged foreign investment enterprises (FIEs). At the same time, the refund available for VAT paid on domestic equipment purchases was also repealed. This was in conjunction with the reform of the VAT system, discussed in an earlier blog on this site.
The PRC government now has issued two notices grandfathering the old VAT benefits until the middle of this year, one for the imported equipment and one for the domestic equipment.
Stephen Nelson, Partner, & Alice Zhang, Taxation
1. Caishui [2008] No.176, jointly issued by the MOF and SAT, in respect of the VAT refunds for domestic equipment purchases.
According to this circular, an FIE can choose to file for the VAT refund if it purchases eligible domestically manufactured equipment up to June 30, 2009, if such FIE has obtained the Confirmation Letter on FIE Projects in Compliance with the National Industrial Policies on or before November 9, 2008 (the date that the VAT reform was announced), and has filed with the local tax authority by December 31, 2008.
2. 2008 Order 43, jointly issued by the MOF, SAT and Customs, in respect of imported equipment
According to this order, the old tax benefits of duty-free and import VAT-exempt shall continue to be available to eligible imported equipment where the Confirmation Letter on the Nationally Encouraged Domestic or Foreign Capital Projects has been obtained before November 10, 2008, and the equipment has been declared for importation before June 30, 2009. Declarations for importation on or after July 1, 2009 shall all attract import VAT, while Customs duties will continue to be exempted in compliance with the old duty exemption rules.
Please feel free to contact us should you have any questions.
Stephen NELSON
+86-10-5758-5137
Dear Sirs, Regarding the text about Import taxes, I would like to know about import taxees and duties on Auto Components and automotive imports.In the restructuring Plan for the Automotive and Automotive Components is there anyhing about this subject?
Best regards,
VaniA Almeida
Dear Sir/Madam,
I am currently importing my equipment through my agent, who pays the justified import duty, but also 17% VAT on the importation price.
We are currently having a long discussion on VAT rebate for this.
Although the 17% is payable upon importation, as per the UK ( which effectively begins the policing of the VAT payable through to the consumer ) I believe that the eventual VAT payable is on the profit acquired only ( difference between imported price, and onselling price )and a rebate should be forthcoming from the 100% VAT paid upon importation.
If the 17% VAT were to be swallowed upon importation, it would surely just become part of Import Duty, rather than a consumer tax?
Thanks and regards
Steve King