New Chinese tax takes effect – Alert
The Chinese government implemented the much-anticipated value added tax of 13 percent, with a few accommodations to exporters. The new provisions took effect Sept. 1.
Fertilizer slated for export between Aug. 31, 2015 and June 30, 2016 can be taxed at either 3 percent or 13 percent. After this period, all items will be charged the higher rate.
Sources say by taking the 13 percent rate producers will be able to file refund claims on taxes paid for the input material. Once the offsets are taken, the tax on the final product will be 2.5-3 percent.
No offsets are available if the seller opts for the 3 percent rate. One source said producers with higher input costs may forgo this option and take the higher rate.
The 3 percent rate applies to material produced prior to Aug. 31 but not yet sold. Sources say this includes material for both domestic and international markets.
Exports are not exempt from the VAT, nor is there be any process for refunding the full VAT for exports. The tax office will use the date the material clears customs for calculating the tax, not the date of purchase or loading.
No special provisions are available for fertilizer imports. Material that did not clear customs by Aug. 31 will be slapped with a 13 percent tax. The tax will be levied against the CFR value of the product.
More clarifications are expected as the tax is implemented.
International traders say producers appear to be willing to absorb the increase because the offering price remains stable.