On July 4, 2014, the State Administration of Taxation issued the Circular of the State Administration of Taxation on Issues Concerning Value-added Taxes on International Freight Forwarding Services (hereinafter, the "Circular"), which provides for issues relating to value-added taxes on international freight forwarding services indirectly provided by pilot taxpayers. The Circular is highlighted as follows.
- Pilot taxpayers who (1) handle international transportation of cargoes, (2) engage in harbor entry and exit of transports for international transportation, (3) coordinate and arrange for navigation, berthing, cargo loading and unloading, or (4) handle ship agency business and formalities indirectly through other agents for consignors may be exempt from value-added taxes in accordance with Article 1, Paragraph (14) in Annex III of the Circular of the Ministry of Finance and the State Administration of Taxation on Including Railway Transportation and Postal Services in the Pilot Program for Value-added Taxes in Lieu of Business Taxes (Cai Shui (2013) No. 106).
- The freight forwarding revenues collected by pilot taxpayers from consignors for the provision of such international freight forwarding services and all of the agency fees paid to other agents should be settled through financial institutions.
- Pilot taxpayers who provide indirect freight forwarding services for cargo transportation between mainland China, Hong Kong, Macao and Taiwan are required to follow the above requirements.
This circular came into force on September 1, 2014.