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China Clarifies Business Tax Calculation Method for Rail Transport Operations

In its recent announcement, the Chinese State Administration of Taxation (SAT) specified the business tax (BT) calculation method for rail transport operations that are conducted through cooperation among different companies.

According to the “Announcement on BT Issues Concerning Transport Operations Completed through Cooperation among Rail Transport Enterprises (SAT Announcement [2011] No.52),” where joint venture rail transport companies, joint-stock rail transport companies, and other types of rail transport companies conduct cooperative transport operations, the carrier shall calculate its turnover following the formula below:

Turnover = Total consideration received + Additional fees and charges – Transport fees paid to other co-transport parties

The “Negotiable Instrument for Clearing of Services Provided by Rail Transport Enterprises” shall be used as the voucher for turnover deduction, and BT shall be calculated and paid accordingly.

The Announcement took effect on September 26, 2011, and all the unsettled BT issues before the date shall be treated in accordance with the document.

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