China Clarifies Status of VAT Amounts Carried Over During Asset Reorganization
Jan. 10 – China’s State Administration of Taxation released the “Announcement on the Treatment of Remaining Value-Added Tax (VAT) Amounts Carried Over During Asset Reorganization by Taxpayers (Announcement  No. 55, hereinafter referred to as ‘Announcement’)” on December 13, 2012, which addresses issues concerning the treatment of remaining VAT amounts carried over during the asset reorganization process. Key information can be found below.
According to the Announcement, where a VAT general taxpayer transfers all of its assets, debts and labor force to another VAT general taxpayer (hereinafter referred to as “new taxpayer”) during the asset reorganization process, and cancels its tax registration according to the relevant procedures, the input VAT amount that has not been deducted before the deregistration may be carried forward to the new taxpayer for deduction.
The competent tax authorities of the original taxpayer are responsible for reviewing the related documents during the asset reorganization, checking the remaining VAT amount, and filling in the “Transfer Sheet for Remaining Input Tax Amounts During Asset Reorganizations by VAT General Taxpayers.” The competent tax authorities of the new taxpayer will then examine this transfer sheet along with materials submitted by taxpayers, and decide whether to allow the new taxpayer to credit the remaining VAT.
The Announcement came into effect on January 1, 2013.
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Value-Added Tax Reform
VAT reform is a confusing transition for many and introduces a number of additional questions, such as exactly what types of input VAT are now deductible. Confusion about the new laws may also allow opportunistic companies to charge higher prices and blame the increase on the tax reform. To add some clarity to the issue – and VAT in general – this issue of China Briefing takes a look at a number of VAT-related questions.
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