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Johannesburg - China's decision to place a 6% VAT charge on freight and related costs is going to have an impact on the importing price from China, warned Asgar Mahomed, managing director of ICT distributor, Esquire Technologies.
Mahomed said the new Chinese policy means that all freight charges paid in China are to be subjected to the tax rise.
“In terms of the new tax law, the cost of the VAT is passed on to customers in China, which can recover it as an output tax refund. If the customer is located outside of China, it represents an additional cost," he said.
“What this means for the import industry is that we are going to see a 6% cost increase, which is going to have to be absorbed into the prices we offer our clients."
He said this is a surprise move by China and will have a ripple effect, as it will “be applicable to all logistic components payable in China”.
In his view it is important to understand that the new rule has been the subject of many discussions and that interpretation may or may not be fully comprehended at this point.
“In the past, freight forwarding firms in China were able to enjoy a 6% refund from the administration of taxation for transportation services, which in turn would allow them to reduce the amount of duties owed by them to the Chinese government," he said.
"However, with the new policy introduced on August 1 2013, forwarding firms in China will now be prohibited from being granted this refund. This new rule effectively means that the 6% VAT charge will now be assessed on all prepaid transportation services in China.”
- Fin24
Mahomed said the new Chinese policy means that all freight charges paid in China are to be subjected to the tax rise.
“In terms of the new tax law, the cost of the VAT is passed on to customers in China, which can recover it as an output tax refund. If the customer is located outside of China, it represents an additional cost," he said.
“What this means for the import industry is that we are going to see a 6% cost increase, which is going to have to be absorbed into the prices we offer our clients."
He said this is a surprise move by China and will have a ripple effect, as it will “be applicable to all logistic components payable in China”.
In his view it is important to understand that the new rule has been the subject of many discussions and that interpretation may or may not be fully comprehended at this point.
“In the past, freight forwarding firms in China were able to enjoy a 6% refund from the administration of taxation for transportation services, which in turn would allow them to reduce the amount of duties owed by them to the Chinese government," he said.
"However, with the new policy introduced on August 1 2013, forwarding firms in China will now be prohibited from being granted this refund. This new rule effectively means that the 6% VAT charge will now be assessed on all prepaid transportation services in China.”
- Fin24
