Procedures for claiming VAT exemption
To be eligible for the VAT exemption, the taxpayers must present a written contract between the service provider in China and the receiving overseas enterprise or individual. The contract will serve as proof that the income of the sale of services or intangible assets is entirely sourced from overseas. Thus, it must be accounted for separately.
List of documents to be submitted
- Contracts for cross-border sales of services or intangible assets
- Evidence of service location outside China
- Proof of international transportation business
- A proof that the purchaser’s agency is located overseas
- Declaration for forfeiture of applicable zero-rated VAT
- Basic information of taxpayers and business introduction
- Tax treaties and international transport agreements
- The first page of the exit document and exit record of outbound business personnel
- The first page of the exit document and exit record of the buyer’s of travel services
The application for the VAT exemption is straightforward using the tax bureau’s e-tax system. After completing the form and uploading the necessary materials, the tax authorities will send a notice within one to three working days.
E-tax form for VAT exemption declaration
The e-tax form must contain the name or type of cross-border transaction, name, and country of the purchasing company overseas, location of the actual recipient of the service, and the place where the service transaction occurred.
After receiving the notice from the tax bureau, the taxpayer can now go through the declaration of the tax-free amount and wait for approval.
The taxpayer should declare the tax exemption not later than April 30 of each year during the corporate income tax settlement period. Furthermore, the required written contract must have a Chinese translation and the signature of the legal representative or the company’s seal.
For zero-rated services, it should be noted that a special VAT invoice cannot be issued. Hence, taxpayers under this transaction must present relevant permits, licenses, or certificates.
(This article was published on July 21, 2020, and was updated on February 19, 2021.)
If you want further assistance with VAT exemption application procedures for your cross-border transactions, contact us to get you started. Also, visit our tax and accountancy page to see more details of our specialist services.
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