Commissioner Doyle announces KPMG TaxWatch Webcast on China VAT Issue; New explanation issued from China on definition of “agents” in Circular 106

Contact: David J. Tubman, Jr., Counsel to Commissioner Doyle

Commissioner William P. Doyle of the Federal Maritime Commission (FMC) today announced that he will be participating in a webcast that will take place on March 6, 2014, on matters related to China’s Value Added Tax (VAT) regime, with specific emphasis on China’s release of Circular 106, as it affects carriers, shippers and ocean transportation intermediaries. Professionals from KPMG LLP, the U.S. member firm of KPMG International, will host the webcast which is part of its TaxWatch Webcast series.

Commissioner Doyle stated, “I appreciate KPMG’s willingness to provide a briefing on China’s VAT program to FMC’s stakeholders. KPMG has volunteered its services time and again during the implementation phase of the VAT program, working with the FMC and other U.S. agencies seeking to clarify the impact on U.S. businesses.” Commissioner Doyle continued, “This issue disproportionately affects small businesses and consumers; they and all stakeholders, large and small, will benefit from this sharing of knowledge.”

Commissioner Doyle has been working with the U.S. State Department through its officials in DC, the U.S Embassy in Beijing, and the U.S. Consulate in Shanghai. Together, the FMC and State Department have been seeking guidance on the VAT through China’s Ministry of Transport, the Ministry of Finance, and China’s State Administration of Taxation. Commissioner Doyle also had discussions on the VAT with officials from China’s Ministry of Transport during the 2013 U.S. – China Bilateral Maritime Agreement Annual Consultations and later during the Global Maritime Regulatory Summit, held at FMC headquarters in mid-December 2013.

In December 2013, Commissioner Doyle briefed the full Commission on the People’s Republic of China’s (PRC’s) implementation of the VAT, as it relates to maritime commerce. Commissioner Doyle informed the Commission that the Chinese government was expected to clarify its position on the VAT that has confused the shipper and carrier communities. On December 13, 2013, the PRC released Circular 106, which supersedes Circular 37 effective January 1, 2014.

On January 22, 2014, the PRC’s Ministry of Finance and State Administration of Taxation provided clarification for freight forwarding agent companies in China with regard to Circular 106 and the definition of “agents” of international goods transportation services. The latest explanation of “agent,” as defined in Article 1.4.6 of Appendix 2 of Circular 106, includes those direct agents and indirect agents, regardless of whether they deal with the international shipping/transportation/cargo companies directly. All these agent companies may be eligible to enjoy the VAT exemption policy for their agency services.

Commissioner Doyle emphasized, “President Obama has urged government officials to focus on increasing regulatory cooperation between the U.S. government and the governments of other countries—with the help of private sector assistance and solid interagency cooperation, we are making progress on providing tax certainty for the shipping community that does business with China.”

The TaxWatch webcast is scheduled to take place on March 6, 2014 commencing at 11:00 a.m. EST and last for approximately 60 minutes. Participants will be able to ask questions during the presentation and CPE credit will be available.

Background Information

• The PRC’s clarification (in Chinese) on defining “agents” in Circular 106
• PRC provides clarity to its recently implemented VAT measures (with unofficial summary)
• Commissioner William P. Doyle’s China VAT briefing to the full Commission
• The Central People’s Government of the PRC posted Circular 106, as issued

China VAT Tax Briefing:

More details on the VAT tax briefing will be provided in the coming weeks. For quick reference:

What: Webcast

Who:  Hosted by KPMG, LLP; Robert Nihen, 201-307-8296

When: March 6, 2014 at 11:00 EST

Also:  1 CPE credit will be available

Register:  At KPMG Institutes TaxWatch Events

Further Details:
China’s Ministry of Finance and State Administration of Taxation released Circular 106 last December, expanding its value-added tax (VAT) pilot program to additional industries. The circular also made significant updates to the VAT treatment of services related to the international transportation of goods. During the week of January 20, 2014, China provided further clarifications for freight forwarding agent companies in China with regard to Circular 106.

In light of the potential impact these changes may have on U.S. companies that are involved with international transportation business with China, KPMG LLP is pleased to invite you to a one-hour Webcast that will cover the latest information on China’s VAT reform with specific emphasis on the latest development of Circular 106 as it affects international carriers, shippers, and ocean transportation intermediaries. Commissioner William P. Doyle of the U.S. Federal Maritime Commission will open the Webcast to provide introductory remarks on the impact of Circular 106 on U.S. business. He will be joined by senior-level professionals from KPMG’s International member firms in China and the United States to discuss:

• Overview of China VAT reform
• China Business Tax/VAT development for international transportation industry
• Circular 106 and the implications on U.S. business
• Uncertainties and future development areas