Notice of the Ministry of Finance and the State Administration of Taxation on the Pilot Work of Levying Value-Added Tax in Lieu of Business Tax in the Transportation Industry and Some Modern Service Industries in Beijing and Other Seven Provinces and Cities (“Notice”)

From Aug. 1 2012, the scope of the pilot work of levying value-added tax(“VAT”) in lieu of business tax shall be expanded from Shanghai to Beijing , Tianjin, Jiangsu Province, Anhui Province, Zhejiang Province (including Ningbo), Fujian Province (including Xiamen), Hubei Province and Guangdong Province (including Shenzhen).

Levying value-added tax in lieu of business tax shall be conducted in the transportation industry and some modern service industries, which are transportation, R&D and technology, information technology, cultural innovation, logistics supports, lease of corporeal movables, attestation and consulting. The VAT rate for R&D and technology, and lease of corporeal movables is 17%, for transportation is 13%, for the other modern service is 6%, but for the international transportation, R&D and technology, and design are 0.

For a foreign invested company, it can make good usage of this chance, eg. strength the ability of R&D center, and license or transfer the technology to its foreign shareholder or other foreign companies, which can cut down the taxation.