New explanation issued from China on definition of “agents” in Circular 106. Industry briefing scheduled for March 6, 2014 concerning the latest information on China’s Value Added Tax regime and its impact on the maritime industry.
Commissioner William P. Doyle of the Federal Maritime Commission (FMC) today announced that he will be participating in a webcast that will take place on March 6, 2014, on matters related to China's Value Added Tax (VAT) regime, with specific emphasis on China's release of Circular 106, as it affects carriers, shippers and ocean transportation intermediaries. Professionals from the global audit and tax firm, KPMG, will host the webcast.
Commissioner Doyle stated, "I appreciate KPMG's willingness to provide a briefing on China's VAT program to FMC’s stakeholders. KPMG has volunteered its services time and again during the implementation phase of the VAT program, working with the FMC and other U.S. agencies seeking to clarify the impact on U.S. businesses." Commissioner Doyle continued, “This issue disproportionately affects small businesses and consumers; they and all stakeholders, large and small, will benefit from this sharing of expertise.”
Commissioner Doyle has been working with the U.S. State Department through its officials in DC, the U.S Embassy in Beijing, and the U.S. Consulate in Shanghai. Together, the FMC and State Department have been seeking guidance on the VAT through China’s Ministry of Transport, the Ministry of Finance, and China’s State Administration of Taxation. Commissioner Doyle also had discussions on the VAT with officials from China’s Ministry of Transport during the 2013 U.S. – China Bilateral Maritime Agreement Annual Consultations and later during the Global Maritime Regulatory Summit, held at FMC headquarters in mid-December 2013.
In December 2013, Commissioner Doyle briefed the full Commission on the People’s Republic of China’s (PRC’s) implementation of the VAT, as it relates to maritime commerce. Commissioner Doyle informed the Commission that the Chinese government was expected to clarify its position on the VAT that has confused the shipper and carrier communities. On December 13, 2013, the PRC released Circular 106, which supersedes Circular 37 effective January 1, 2014.
On January 22, 2014, the PRC’s Ministry of Finance and State Administration of Taxation provided clarification for freight forwarding agent companies in China with regard to Circular 106 and the definition of “agents” of international goods transportation services. The experts at KPMG view the latest explanation of “agent,” as defined in Article 1.4.6 of Appendix 2 of Circular 106, to include those direct agents and indirect agents, regardless of whether they deal with the international shipping/transportation/cargo companies directly. All these agent companies should be eligible to enjoy the VAT exemption policy for their agency services.
Commissioner Doyle emphasized, "President Obama has urged government officials to focus on increasing regulatory cooperation between the U.S. government and the governments of other countries—with the help of private sector assistance and solid interagency cooperation, we are making progress on providing tax certainty for the shipping community that does business with China.”
The webcast is scheduled to take place on March 6, 2014 commencing at 11:00 a.m. EST and last for approximately 60 minutes. The participants will be able to ask questions during the presentation and CPE credit will be available.
The PRC’s clarification (in Chinese) on defining “agents” in Circular 106 can be found at: http://szs.mof.gov.cn/zhengwuxinxi/zhengcejiedu/201401/t20140122_1037995.html.
PRC provides clarity to its recently implemented VAT measures (with unofficial summary): http://www.fmc.gov/china-vat-doyle/
Commissioner William P. Doyle’s China VAT briefing to the full Commission can be found here: http://www.fmc.gov/doyle_u.s.-china_bilateral_consultation/
The Central People’s Government of the PRC posted Circular 106, as issued: http://www.gov.cn/zwgk/2013-12/13/content_2547300.htm
More details on the VAT tax briefing will be provided in the coming weeks. For quick reference:
China VAT Tax Briefing:
- What: Webcast
- Who: Hosted by KPMG
- When: March 6, 2014 at 11:00 EST
- Also: 1 CPE credit will be available
- Further: More details will be forthcoming