China facilitates bonded refurbishment of medical equipment and rolls out simplified APA procedure

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

China facilitates bonded refurbishment of medical equipment and rolls out simplified APA procedure

Sponsored by

sponsored-firms-kpmg.png
New rules set to facilitate the bonded refurbishment of imported medical equipment in China

Lewis Lu of KPMG discusses the new rules to facilitate the bonded refurbishment of imported medical equipment in China and the simplified APA procedure that takes effect September 1 2021.

Bonded refurbishment of medical equipment facilitated

COVID-19 has significantly increased demand, both in China and in other countries, for advanced medical equipment, e.g. high end medical scanners. While suppliers of such equipment have seen a surge in their sales, they are also facing challenges in fulfilling after-sales service needs. The increasing diagnosis demands and associated heavy usage of the machines has led to increased need for refurbishment and after sales services. 

One potential solution is to set up a global refurbishment hub in China. However, under the current Chinese business and regulatory rules, importing used equipment to China for refurbishment purposes is a restricted business activity which is subject to layers of approvals. 

To address this, the Chinese State Council (i.e. cabinet) issued Circular Guobanfa [2021] No. 24 (Circular 24) in July 2021 directing government authorities to set new rules to facilitate the bonded refurbishment of imported medical equipment in China, including that: 

  • Support should be provided to the conduct of bonded equipment refurbishment activities in comprehensive bonded zones, including by pilot free trade zone businesses. Provincial governments will be responsible for this development and its monitoring. Refurbishment carried out under bonded condition means that the equipment will not be subject to import taxes at the time when it is brought from overseas into the comprehensive bonded zones. Furthermore, refurbishment services, performed by businesses established in comprehensive bonded zones for overseas entities, would generally be exempt from VAT.

  • The Catalogue of Refurbished Products (catalogue) should be updated on an ongoing basis and the inclusion of medical equipment and other products into the catalogue should be considered. The refurbished items would need to be imported from and exported to overseas.

  • Pilot arrangements should be explored which would allow qualifying businesses, located outside of comprehensive bonded zones, to start bonded refurbishment activities for their self-manufactured and exported products. The pilot refurbishment activities should not only be of high tech and high value nature, but also meet the prescribed environmental protection requirements.

  • A more comprehensive policy for bonded refurbishment should be ready by 2025.

Circular 24 opens up new opportunities for global advanced medical equipment businesses. However, detailed rule formulation will still require the input of multiple Chinese authorities. 

Rollout of simplified unilateral APA procedures

The China State Taxation Administration (STA) has announced that simplified advance pricing arrangements (APA) procedures will take effect from September 1 2021. These were previously subject to public consultation in April (see previous article for more details). The final guidance does not differ significantly from the draft – changes are highlighted below: 

  • In the draft, TP documentation would have to be provided at least three months prior to the unilateral APA application. This is no longer required in the final guidance; and

  • The list of situations where the unilateral APA applications would not be accepted has been altered:

  • In the draft the occurrence (in an APA application year) of substantial changes to related party transactions, the business environment, or functional risks could have excluded the possibility of a simplified APA application. This is no longer the case in the final guidance; and

  • It has been added that refusal to cooperate with tax authorities in relation to on-site functional interviews will exclude a company from access to the simplified APA procedure.

In a separate development, from July 1 2021 the STA has adopted administratively simpler approaches for taxpayers to claim several corporate income tax reliefs. These remove documentation demands formerly imposed on taxpayers claiming foreign tax credits (i.e. the need to provide audit reports on foreign subsidiaries), claiming tax sparing credits (i.e. evidence of entitlement to overseas tax incentives), or claiming special tax relief for restructuring transactions (i.e. evidence of equity transfers).  

The simplifications also cover three deed tax incentive claim matters (e.g. deed tax incentives for property purchased by individuals). Under the new approach taxpayers simply sign and submit a letter of commitment to tax authorities committing that they are qualified for these reliefs, with no need to provide diverse evidential materials as before. 

Lewis Lu

Partner, KPMG China

E: lewis.lu@kpmg.com

more across site & shared bottom lb ros

More from across our site

Canadian Prime Minister Mark Carney and US President Donald Trump have agreed that the countries will look to conclude a deal by July 21, 2025
The firm’s lack of transparency regarding its tax leaks scandal should see the ban extended beyond June 30, senators Deborah O’Neill and Barbara Pocock tell ITR
Despite posing significant administrative hurdles, digital services taxes remain ‘the best way forward’ for emerging economies, says Neil Kelley, COO of Ascoria
A ‘joint understanding’ among G7 countries that ‘defends American interests’ is set to be announced, Scott Bessent claimed
The ‘big four’ firm’s inaugural annual report unveiled a sharp drop in profits for 2024; in other news, Baker McKenzie and Perkins Coie expanded their US tax benches
Representatives from the two countries focused on TP as they met this week to evaluate progress under a previously signed agreement – it is understood
The UK accountancy firm’s transfer pricing lead tells ITR about his expat lifestyle, taking risks, and what makes tax cool
Dolphin Drilling intends to discuss the final liability amount and manner of settlement with HM Revenue and Customs
Winning the case against the 20% VAT imposition was always going to be an uphill challenge for the claimants, UK tax advisers argue
A ‘paradigm shift’ in Chile’s tax enforcement requires compliance architecture built on proactive governance, strategic documentation and active monitoring of judicial developments
Gift this article