Company A provides overseas outsourcing services on which it earns overseas revenue and can enjoy corresponding preferential tax incentives.

1. Company Situation

1) Overseas technology services introduction

Since 2009, Company A has provided market analysis, financial analysis, and business process management outsourcing services to overseas market via the SAP system.  

2) Overseas services revenue and taxation

- Annual overseas BPO services revenue 

The revenue is estimated about 80 million to 100 million RMB. The company has already acquired the Commission of Commerce (COC) offshore outsourcing system BPO approval certificate and has obtained the VAT exemption qualification from the tax bureau.

- Taxation

Since the VAT exemption approval was obtained in May, 2013, the company started to enjoy the VAT exemption from June, 2013. It was previously paying 5% BT and 6% VAT.

- Tax refund

Currently, Deloitte helping the company with the BT and surtax refund.

- Tax authorities

Chaoyang District Office No. 11 and Chaoyang Foreign Affairs Local Tax Bureau 

Note: The Company is currently located at Yizhuang District and the tax office transfer has not yet been applied and completed.

3) Other aspects

- Main income

The annual income is 500 million RMB, which consists of above overseas service income and mainly of the sales products income.

- Accounting

The accounting is consistently handled by the Shanghai affiliated company.

2. RTF Analysis

1) Current BPO contract analysis

Deloitte helped the company to draft the relevant BPO contract before May, 2013, but, at that time, the cross-border tax-free refund contract policy was not yet issued, leading to the following issued:

- Service content: The advanced technology in the service content is not introduced in details. 

- Contract amount: With the annual overseas service revenue being 80 million to 100 million RMB, the current contract service content and service fee cannot reasonably support the costs.

- Supplement filing: With the contract being signed in 2009 and with the filing not being done within 1 month of the signing date, it is necessary to further consider the relative filing alternatives, for example, whether the online filing system can be supportive of expired contract filing or whether the approval authorities can accept the expired contract filing application documents.

- Other aspects: There should be a fixed contract period, a fixed contract revenue amount, payment methods and so on. 

2) Tax refund planning

- Redraft the contract in accordance with RTF above analysis.

- Get the revised technology imports and exports contract registration approval from the COC.

- Obtain the revised technology services contract approval certificate from the Technology Market Management Office (TM).

- File the revised cross border contract at the State Tax Bureau

- Apply for the tax refund on the cross-border contract

3. Relevant Tax Policy

- Article 29 of the operational guide of the cross-border services VAT exemption 

4. Contract Filing Risk Control and Other Preferential Policies

- Obtaining the 3rd parties approval from the COC and the TM, this supports that the company is certainly within the VAT exemption/refund bracket and at the same time reduces the risk of the tax office auditing the company accounts.  

- Opportunity to apply for the COC financial subsidy, whereby, obtaining 0.1 RMB on every 1 USD worth of cross-border revenue