1. Introduction VAT is chargeable on the sale of goods, provision of processing and repair service, and the importation of goods within the People’s Republic of China. Generally, output tax charged on the sales of goods may be set off against input tax incurred on the purchase of the goods or materials. However, some input tax is not creditable, such as the goods purchased for non-taxable and tax-exempt items, or abnormal losses. Beginning from April 1, 2002, capital equipment imported for foreign investment projects in the “Encouraged” Category and imported for self-use within the total investment limit, can be imported free of VAT and customs duty, if the capital asset is not included in the “Catalogue for Foreign Investment Project Import Items that are not Tax-exempt”. 2. Mixed Sales A mixed sales activity involves both goods and non-taxable services. Mixed sales activities of enterprises engaged in production, wholesaling or retailing […]