China VAT and Business Tax reform raises taxes on air and sea logistics

Sat 28th Sep 2013

As the reform of the Chinese VAT regime progresses and number of industry have seen the costs of doing the business there rise.

The increase in transport taxes comes as Chinese Business Tax is replaced by the new VAT system.  Business Tax is levied as a straight turnover tax, typically between 3% and 5% for transport services.  This included the right to deduct from the taxable base international transport costs and port services.

Since the launch of the initial Shanghai VAT pilot in 2012, this have changed region by region to 11% and 6% VAT for transport and logistics, respectively.  The whole of China moved to VAT on transport at the start of August 2013.

Whilst there were initially allowances for the deductions of some costs, this has now gone following the full role out of China VAT in August 2013.  This meant that logistic and transport companies could no longer offset some of the old allowances.  Also, transport services provided by foreign companies have now moved to 11%, too.