The Chinese government has introduced a pilot scheme relating to VAT on services in the transport & service sector (see below).

Accordingly to “Tax Policy of VAT Pilot Program on Transportation & Modern Service Sector”, the related VAT tax policy will be expanded nationwide with effect from 1st August 2013.

An additional 6% Value-Added Tax (VAT) will be levied for all the charges payable at China from 1, August,2013, based on the issuance date of VAT Invoice.

Effectively, from 1st August all EXW/FOB/CNF costs will be subject to a 6% VAT charge. IF the ocean freight is on a “Freight forward” basis (the freight being paid at destination) the VAT will not apply. FOB’s that are subject to the 6% VAT will obviously be paid by the shipper/supplier.

If you are purchasing from Chinas on CNF terms (freight prepaid), it might be worth your while considering a change to FOB to save the 6% VAT charge.

Please feel free to call us should you have any queries or concerns.