Logistic firms can not benefit from new VAT system in Shanghai

It is good news that mainland authorities have rolled out measures to ease tax burdens on service firms from reducing their payment, however, it does not take the right effect and it has made things worse since two-thirds of companies stated that they have to pay more when value added tax replaced the original system that was based on sales volume.

A pilot scheme has been launched in Shanghai on January 1 and the new rate has been carried out. A survey showed that two-thirds of 120 corporate respondents have to pay more compared with the old tax system.

Logistics service providers as service firms were subject to a sales tax of 3 per cent before the reform.

This percentage was based on the value of their total sales. The trial program in Shanghai abandoned the tax on sales and replaced it with a value added tax system, which levied at a rate of 11 per cent.

The change was supposed to reduce their tax rates.
Under the new system, the value of invoices issued by suppliers of raw materials is measured against the value of the sales invoices issued by the service companies to their customers.

The difference between the two is considered to be the "value added".

The new tax regime has given logistics companies a lot of trouble and the authorities need to make amends on the new tax system.

The intention is expected to reduce tax collections by 400 billion yuan through new VAT system.

IBUonline is a B2B e-business platform, which has cooperated with some logistic companies to provide services for those who may have difficulties in foreign trade business.

Please go to IBUonline homepage for more details.