Feb. 15 – Starting on December 1, 2011, value added tax (VAT) payers can deduct the costs associated with purchase of VAT control equipment, and any costs incurred when conducting technical maintenance on the equipment, from VAT payments.
The “Circular on VAT Deduction Policy Concerning the Costs on Special Equipment for VAT Control System and Its Technical Maintenance (caishui  No.15)” – released by the State Administration of Taxation and the Ministry of Finance on February 7, 2012 – clarified the VAT exemption details.
Where a VAT payer purchases special equipment for the VAT control system (including sub-invoice machines) for the first time on and after December 1, 2011, the expense – equaling to the total amount of the equipment price and VAT shown on the equipment’s special VAT invoice – can be deducted in full from the company’s VAT payment. If the company’s total VAT payment during the current term is not high enough to bear a full deduction of such expenses, the rest of the expenses can be deducted from the VAT payment during the next term.
However, the expenses incurred by a VAT payer for non-first-time purchases of VAT control equipment shall not be deducted from VAT payments.
Technical maintenance fees charged on a VAT payer on and after December 1, 2011 (excluding back payments for such fees occurring before November 30, 2011) can be deducted in full (in accordance with the amount shown on the technical maintenance invoices) from the company’s VAT payment. If the total VAT payment during the current term is not high enough to bear a full deduction of such fees, the rest of the fees can be deducted from the VAT payment during the next term.
Where a VAT payer has already deducted both types of the aforementioned equipment expenses in full from its VAT payment, its input VAT shall not be recovered from the output VAT.
The VAT control equipment suppliers are responsible for providing free maintenance and replacement services within three years upon the equipment purchases.
The aforementioned VAT control systems include:
- VAT security control systems
- Special VAT invoice control systems for freight services
- Invoice control systems for motor vehicle sale
- Invoice control systems for road/waterway cargo transport services
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