Jurisdiction - China
Reports and Analysis
China – New Rules On VAT Exemption For Exported Services.

17 November, 2014

On August 27, 2014, the SAT issued SAT Bulletin [2014] No. 491(“Bulletin 49”) to cover VAT exemption for exported postal services and telecommunications services. Bulletin 49 took effect on October 1, 2014. Bulletin 49 supersedes SAT Bulletin [2013] No. 52 (“Bulletin 52”) and restates much of the basic regulatory framework for the VAT exemption of exported services.

Since the issuance of Bulletin 52, the scope of the VAT pilot program has been expanded to cover postal services and telecommunications services. Accordingly, Bulletin 49 also expands the scope of the VAT exemption for exported services provided by domestic VAT taxpayers to cover: 

1. Postal services for exported goods, which refer to:


– The delivery of letters and packages from China to locations outside China;
– The issuance of postage stamps to recipients outside China;
– The export of stamp album; and
– The provision of agency services, such as express delivery services, to foreign recipients.


2. Pick-up and delivery services for exported letters and packages.

3. Telecommunications services provided to foreign entities or individuals who pay the service charges to intermediary foreign telecommunications entities that in turn pay the Chinese telecommunications companies (i.e., global roaming services). These telecommunications services provided to foreign telecommunications companies include international voice calls and short message or multimedia message services. 

Another important change in Bulletin 49 is the relaxation of the payment flow requirement. In order to qualify for VAT exemption, the VAT-exempt service revenue should be received from abroad. Previously, Bulletin 52 did not clarify what constitutes “revenue received from abroad”. In practice, tax authorities used to interpret this requirement as the payments had to be made by the foreign service recipient to the domestic service provider. Such strict interpretation had made it difficult for some MNEs to qualify for VAT exemption because many MNEs make service payments through their Chinese settlement centers. Under Bulletin 49, however, payments made by foreign service recipients through their Chinese settlement centers (e.g. cash pooling units) can be deemed as “revenue received from abroad”.

Bulletin 49 may be applied retrospectively to services provided prior to October 1, 2014. Taxpayers previously denied VAT exemption as a result of the use of Chinese settlement centers can re-apply for the VAT exemption under Bulletin 49.


End Notes:


1 Bulletin of the State Administration of Taxation on the Re-issuance of Administrative Measures for Value-Added Tax Exemption on Cross-border Taxable Services Under the VAT Pilot VAT Program (For Trial Implementation), (SAT Bulletin [2014] No. 49), issued on August 27, 2014 and effective from October 1, 2014.


Baker McKenzie


For further information, please contact:


Jon Eichelberger, Partner, Baker & McKenzie

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Jinghua Liu, Partner, Baker & McKenzie

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Brendan KellyPartner, Baker & McKenzie
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William MarshallPartner, Baker & McKenzie
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Glenn DeSouza, Baker & McKenzie
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Shanwu Yuan, Baker & McKenzie
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