Lack of clarity of the new Chinese VAT Tax implemented on August 1st, 2013 is causing mounting frustration for Shippers & Freight Forwarders. Since the laws are so vague, many carriers are interpreting them differently and billing VAT to shippers/forwarders based on their interpretation causing inconsistency with the carriers. In addition it is making it very difficult to manage cost and determine accurate landed costs.
We are keeping a close eye on the situation and wanted to share a couple of articles we found to be interesting.
From JOC – Journal of Commerce:
A new valued-added tax of 6 percent on logistics services and 11 percent on domestic transportation is racking confusion on the industry, as shippers and transportation providers try to interpret vague language out of Beijing. The tax, which took effect on Aug. 1, allows Chinese manufacturers to claim valued-added credits on their taxes, an improvement from the 5 percent business tax. But the lack of clarity about the impact on international shipping, which is exempt from the VAT, is raising concern that some misguided or bad actors are taking advantage of shippers.
The NITL [National Industrial Transportation League] in August asked the U.S. government to provide clarity on carriers charging shippers a 0.75 percent fee for handling the VAT. The Federal Maritime Commission and State Department said they are looking into the matter.
Chinese shipper and transportation groups, including the Hong Kong Association of Freight Forwarding and Logistics, are asking Beijing for clarification. The Chinese government has a history of issuing new regulations and initiatives, and outlining the specifics in the following months.
The JOC article
The problem is that international container lines are not sure whether they are exempt from VAT or not. All the carriers have China offices and as that is where the billing of mainland shippers originates, so they fear Beijing may treat them as agents instead of international shipping services, which means their business will be eligible for the tax.
For more information on this article: maritimeprofessional.com
We will continue to monitor the situation and provide more information as it becomes available.