CHINA TAXATION VAT Small-scale Taxpayer VS VAT General Taxpayer

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Items VAT Small-scale Taxpayers VAT General Taxpayer
1 Application Criteria ·         Company shall be ratified as VAT small-scale taxpayer when registration with no need for separate application;

·         The company’s annual taxable sales shall not exceed RMB5 million.

 ·         The company shall apply for the qualification of VAT general taxpayer when its annual taxable sales reach or exceed RMB 5 million, if not apply, it shall be compulsorily ratified as VAT general taxpayer;

·         Newly registered company or company with annual taxable sales not exceeding RMB5 million can apply for the qualification of VAT general taxpayer if it has fixed operation place and can provide legal and valid vouchers and accurate tax filing data.
2 Tax and Levy Rate The applicable levy rate is 3%. The applicable tax rate is divided into four levels, 16%, 10%, 6% and 0% respectively.
3 Tax Filing Method VAT and its surcharges shall be declared on quarterly basis. VAT and its surcharges shall be declared on monthly basis.
4 Tax Calculation Taxable Sales/(1-Levy Rate)*Levy Rate. Output VAT – Input VAT.
5 Input VAT Not deductible. The input VAT obtained for purchasing goods, assets and taxable service is not deductible even if VAT special invoice could be obtained. Deductible. The input VAT as shown on the VAT special invoice for purchasing goods, assets and taxable service and the withholding VAT incurred for remitting payments to foreign companies is deductible.
6 Input VAT Accounting Treatment The price and relevant VAT shall be posted into the accounts of assets, costs or expenses in full amount. Adopt “price and tax separated” policy. The price shall be posted into the accounts of assets, costs or expenses, while, the VAT shall be posted into the account of tax payable-VAT payable-input VAT, so as to offset output VAT.
7 Issuance of VAT Special Invoice ·         VAT small-scale taxpayer with monthly sales not exceeding RMB30,000 or quarterly sales not exceeding RMB90,000 whose business scope covers accommodation, consultancy, construction, manufacturing, software, information transmission, information technology can issued VAT special invoice by itself;

·         Other companies shall need to apply with tax bureau to issue VAT special invoice;

·         The VAT rate shown on the VAT special invoice shall be 3% for the invoice either issued by company itself or by tax bureau.

 VAT special invoice can be issued for goods selling or taxable service rendering and the rates shown on the invoice can be 16%, 10% or 6%, which is subject to the goods or service sold.
8 Export Tax Rebate VAT shall be exempted for export business and no rebate can be applied. The applicable VAT rate is 0% for export business. Refund can be applied for the input VAT generated for purchasing of goods and taxable service and the rebate rate or amount of tax refund shall be subject to the category of the exported goods or service.
9 VAT Preferential Tax Policy ·         As at 31 December 2020, small and micro enterprises with monthly sales not exceeding RMB30,000 can enjoy VAT exemption;

·         As at 31 December 2020, enterprises engaging in goods or intangible assets selling, repairing and other taxable service rendering with monthly sales not exceeding RMB30,000 (quarterly sales not exceeding RMB90,000) can enjoy the VAT exemption.

 NIL
10 Urban Construction Tax preferential policy Urban construction tax shall be exempted together with the exemption of VAT and the exemption criteria are the same as those for VAT. NIL
11 Surcharges Tax Preferential Policy Small and micro enterprises with monthly sales or business income no more than RMB100, 000 (quarterly sales or business income not exceeding RMB300,000 for quarterly filing taxpayer) shall be exempted from educational surcharge, local educational surcharge and water conservancy and construction fund.
12 Corporate Income Tax Preferential Policy As at 31 December 2019, for small and micro enterprises with annual taxable income of no more than RMB 1 million, the taxable income shall be halved for tax calculation and the applicable corporate income tax rate shall be 20%.
13 Applicable Enterprises Applicable to those companies which cannot obtain VAT special invoice and will not issue VAT special invoice. Applicable to those companies which:

·         need to issue VAT special invoice; or

·         have large amount of input VAT to offset output VAT; or

·         need to apply for VAT rebate for export business.

Note:

1. Annual taxable sales refer to the accumulated VAT taxable sales for no more than 12 consecutive months, including the tax exempted sales.

2. The criteria for small and micro enterprise:

• Enterprises with annual taxable income of no more than RMB1 million; and
• For manufacturing enterprises, the employees shall not exceed 100 heads and the total assets limit to RMB30 million; or
• For other enterprises, the employees shall not exceed 80 heads and the total assets limit to RMB10 million.

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