1. Company Brief Situation

1) Corporate Structure

A. Belgium Headquarter(HQ)

As the headquarter of all the branches allover the world, the Belgium HQ owns the IP of the products and provides therelevant support to its subsidiaries.

B. Hong Kong Subsidiary

As the secondary China control andmanagement company, the Hong Kong subsidiary company has 100% shares andcontrol over the Beijing subsidiary.

C. Beijing Subsidiary

The Beijing subsidiary company is in charge of developingthe Chinese market and of sales.

2) Business scope

Development of software products； Analysis of softwareproducts； Software product training; Technicalconsulting and sales of software.

2. Company Current Requirements

Application of VAT exemptionand refund of technology contracts.

- Contract Summary: Cross-border technologyservice contract signed between the HK subsidiary and the Beijing subsidiary.

- Overseas Revenue: The 2014 overseas servicerevenue estimated at about 10 million. Problems:

A. How to avoid VAT?

B. Can the Beijing subsidiary applyfor the VAT exemption or refund?

C. Can the currentcontract be used to apply for VAT exemption?

 

3. VAT exemption analysis

1) Relevantpreferential tax policies introduction

·        Caishui Taxation (2013)106

·        2013 State Tax Announcement No. 52

·        2013 Beijing State Tax Announcement No. 22,

·        27th Nov 2013 Beijing VAT Operation Guidance

2) Policies application

A. Is the Beijing technology company contracteligible for the VAT exemption and refund policy?

The Beijing subsidiary cross-bordertechnology services that are within the scope of VAT exemption can besummarized as follows:

·        Software development(R & D)

·        Software Technology analysis ,maintenance and Consulting Services

·         Does the contract meet the current preferential policies?

The Technology nature and content islacking from the contracts and the contracts are also not drafted based on theTechnology Contract Management Regulations, for instance, valid date, price setup, etc.

 

4. RTF VAT exemption and refund suggestions

1)  VAT exemption and refund applicationprocess

A.  Technology Enterprise Market, departmentunder the Beijing Science and Technology Commission

B.   Beijing Commission of Commerce (BJCOC)Technology Import and Export Contract System

C.   Beijing Commission of Commerce (BJCOC)Technology Outsourcing Services Contract System

2)   The main points for drafting thecross-border technology contract

·        Contract number

·        Contract title

·        Technology service provider and recipient

·        Mode of payment

·        A fixed service contract amount (No approximate, estimate and cost plusamount)

·        Contract validity date

·        Contract technology related contents

3)  The main list of documents

·        Contract template and technological support materials

·        Project introduction , outcomes introduction

·        Bank：contract， invoices，bank receipt voucher , foreignincome declaration invoice (Note: Do ask bank if not available)

·        Sub-ledgers of the revenue and AR

5. RTF's solutions

1) RTF service contents

2)  Application of VAT exemption and refund

No	Details	Time
1	HQ Project Confirmation Agreement	20 Working Days
2	Meeting with Beijing technology dept staff
3	Handover of supportive documents to RTF
4	Feasibility report of the project
5	Signing of the engagement letter
6	Draft the technology contract, whether starting from 2013/9/1	5-7 Working Days
7	Consultwith Beijing subsidiary and negotiate with relative authorities about the contract
8	Registration and filing at the Technology Market Enterprise	5 Working Days
9	Registration and Filing at the BJCOC Technology Import and Export Contract System	5 Working Days
‍‍‍ 10‍‍‍‍‍‍‍‍‍‍‍‍	VAT Free Registration and filing at the state tax office	2-3 Working Days
11	VAT Refund Registration and filing at the state tax office on the previous 3 years taxpayments	Around 6 months
12	Surtax Registration and filing at the local tax office on the previous 3 years tax payments	Around 6 months (Surtax is refunded every December).