What are the recent changes to VAT for service firms in Shanghai and Guangdong all about? How will this affect international buyers?
Previously many service firms where subject to business tax of 5%. In 2012 China started a very comprehensive VAT and Business Tax Reform and BT has been abolished now.
Most service providers in Shanghai and Guangdong now have to apply a 6 % VAT.
The overall effect for international buyers depends on each individual business transaction, so if you are buying a service from a supplier in China mainland, there can be the possibility of tax exemption; this would give your service provider room to lower their prices.
I would recommend every buyer to observe the market carefully and pay special attention to the offers they receive from their service providers. Ask yourself questions like:
Are there any changes in pricing?
Is VAT explicitly mentioned?
And also, why not ask your suppliers how the changes affect them?
Important to know for any foreign buyer, a trading transaction where goods are exported is not touched by this reform directly, so for this part it is business as usual.
If you’d like to find out more about this topic, please visit our website.www.fiducia-china.com
Thaddaeus Mueller, Associate Director of Business Development/Personnel Management.
Thaddaeus’ area of expertise is to find innovative solutions for clients seeking to establish their presence in Hong Kong or China. He evaluates situations and strategies to identify the right tools and services and is experienced in advising both SMEs and large companies from many different parts of the world. He also manages Fiducia’s executive search in finding and placing high-level professionals for various industry leaders.
Thaddaeus is a frequent speaker at China-focused events in Hong Kong and Germany on topics ranging from setting up viable sourcing strategies for SMEs in Hong Kong and China to identifying suitable acquisition targets in China. His articles are printed regularly in various publications, such as China Contact, Asia Bridge and in Fiducia’s China Focus newsletter. Thaddaeus is Chairman of the board for AGN Asia Pacific, advisory board member of the China Sourcing Information Center and a member of the Europe Committee of the Hong Kong General Chamber of Commerce (HKGCC).
Thaddaeus joined Fiducia in January 2005, prior to which he worked in the automotive industry and for the fabrics and fibres division of W.L. Gore, a large US technology company. Thaddaeus holds a Master’s degree in Economics and Business Administration from the Catholic University of Eichstaett, Germany. During his studies he has completed research on the automotive industry in South Africa and studied at Stellenbosch Business School, South Africa. Thaddaeus is a native German speaker and speaks English fluently.