On 8 January 2018, the Ministry of Finance (MOF), General Administration of Customs (GAC) and State Administration of Taxation (SAT) jointly issued Announcement on Enhancing the Tax Refund Policy for Departure Ports (Cai Shui  No. 5, “Circular 5”). Circular 5 enhances and extends the existing tax refund rules set out in Cai Shui  No. 53 (“Circular 53”), and came into effect from its date of issuance.
Per Circular 53, tax refunds may be obtained for exported containerized cargo provided that all of the following conditions are met [the tax eligible for refund is the input VAT paid by the exporter, and attributable to the exported goods].
The eight “start shipment ports” are: Longtan port in Nanjing, Taicang port in Suzhou, Liangyungang port in Liangyungang, Zhujiaoqiao port in Wuhu, Chengxi port in Jiujiang, Qianwan port in Qingdao, Yangluo port in Wuhan and Chenglingji in Yueyang.
Circular 5 builds on Circular 53 and makes some enhancements:
The enhanced export refund/exemption regime is being rolled out in parallel with other such initiatives to facilitate international trade. On 13 September 2017, SAT issued Announcement  No. 35, setting out a simplified export tax refund (exemption) procedures for foreign trade integrated services enterprises (see KPMG China Tax Weekly Update (Issue 40, October 2017) for details).
On 29 January 2018, the SAT issued SAT Announcement  No. 6 (“Announcement 6”). This provides more guidance for implementing the Administrative Measures for Registration of VAT General Taxpayer Status (SAT Order No. 43, the “2017 Measures”), which was issued in December 2017.
The 2017 Measures made revisions to the 2010-issued SAT Administrative Measures for Recognition of General VAT Taxpayers Status (SAT Order No. 22), and moved VAT general taxpayer registration from a pre-approval to a simpler recordal process. It came into force from 1 February 2018 (see KPMG China Tax Weekly Update (Issue 2, January 2018) for details).
Announcement 6 makes the following clarifications to the 2017 Measures:
In respect of China VAT system development, Mr. Xiao Jie, the Chinese Minister of Finance, in his article entitled “Speeding up the Establishment of the Modern Fiscal System” published in the People’s Daily newspaper on 20 December 2017, highlighting the further steps that China will take. In particular:
(See KPMG China Tax Weekly Update (Issue 50, December 2017) for details)
China Customs introduced an advance ruling regime with the issuance of Interim Administrative Measures on Advancing Rulings (GAC Order No. 236, the “2017 Interim Measures”) in December 2017.
According to the 2017 Interim Measures, effective from 1 February 2018, an applicant may, prior to its actual import or export of goods, apply for an advance ruling. In particular, an advance ruling can be obtained for: (i) classification of goods imported or exported; (ii) place of origin determination, or qualification of goods as original products; (iii) determination of dutiable value and valuation methods for imported goods (see KPMG China Tax Weekly Update (Issue 4, January 2018) for details).
On 31 January 2018, GAC issued Announcement  No. 14 (“Announcement 14”) for guidance on the implementation of the 2017 Interim Measures, including:
Advance ruling decisions will be published (e.g. on the website of China Customs), except those containing trade secrets.
With regard to the detailed analysis and interpretation on Announcement 14 and the 2017 Interim Measures, please read the following KPMG publications:
On 23 January 2018, the OECD announced a new pilot program for multilateral risk assessment of large multinational entity (MNE) groups. The pilot program - the International Compliance Assurance Program (ICAP) - is a voluntary program that will use country-by-country (CbC) reports and other information to facilitate co-operative multilateral engagements between MNE groups and multiple tax administrations. The goal is to provide early tax certainty and assurance for both taxpayers and tax administrations.
By facilitating a multilateral discussion between MNE groups and multiple tax administrations, ICAP should improve the effective use of information (such as the CbC report, Master file and Local file, etc.) available for risk assessments. In the longer term, this should result in fewer disputes entering into mutual agreement procedures (MAP).
ICAP is being piloted by eight FTA (OECD’s Forum on Tax Administration) member tax administrations, namely Australia, Canada, Italy, Japan, the Netherlands, Spain, the United Kingdom, and the United States. A multilateral assessment of specific international tax risks posed by each MNE group in the pilot program is scheduled to begin during the first half of 2018 and to be completed within 12 months.
A handbook which provides more detail on the program and the procedure for the pilot was also launched. According to the handbook, the program focuses mainly on assessing permanent establishment (PE) and transfer pricing risks and aims to provide companies with certainty on their international tax risks. At the end of the risk assessment process, each covered tax administration would issue a letter, outlining the covered risks where the tax administration has been able gain to assurance and any identified tax risks.
ICAP does not provide MNE groups with the legal certainty that could be achieved through, for example, an advance pricing agreement. ICAP facilitates an open discussion between MNE group and tax administrations, and facilitates obtaining tax certainty in respect of MNE cross-border activities and transactions.
* China has yet to participate in the pilot program. If China were to participate, at some later point, it could provide greater tax certainty for MNEs operating in China, as well as for Chinese MNEs operating overseas. For more information about transfer pricing and CbC report, please read the following KPMG publications: