China Clarifies Tax Collection Issues Under Nationwide Tax Reform
Jul. 22 – China’s State Administration of Taxation (SAT) released the “Announcement on Issues Concerning the Administration of Tax Collection under the Nationwide Business Tax (BT) to Value-added Tax (VAT) Pilot Conversion (Announcement of SAT  No.39, hereinafter referred to as ‘Announcement’)” on July 10, which clarifies several tax collection issues under the nationwide VAT reform. Detailed information can be found below.
Use of Invoices
From the date of the implementation of the pilot project, VAT taxpayers shall not issue uniform invoices for road/inland water freight transportation services. Specifically:
- VAT general taxpayers (hereinafter referred to as ‘general taxpayer’) providing freight transportation services shall use special VAT invoices for freight transportation and ordinary VAT invoices, while general taxpayers engaged in other taxable activities shall use special VAT invoices and ordinary VAT invoices.
- Small-scale taxpayers providing freight transportation services may apply to the competent tax authorities for issuance of special invoices if the service recipients request such invoices.
General taxpayers providing port and dock services, freight and passenger terminal services, loading/unloading and handling services, and passenger transport services may choose to use ordinary invoices with a fixed amount.
General taxpayers engaged in the international freight forwarding agency business shall use six-copy special VAT invoices or five-copy ordinary VAT invoices. Small-scale VAT taxpayers engaged in the international freight forwarding agency business shall use ordinary invoices.
Where a taxpayer has provided taxable services for which VAT is to be levied in place of BT, and where they have already issued the BT invoices prior to the implementation of the pilot project, the taxpayer shall apply to the original competent tax authority for the issuance of the red-letter BT invoices before March 31, 2014, if:
- Its services are terminated, a discount is made on its services, or there is any error in the invoices; and
- The BT invoices are disqualified for becoming invalid.
Use of Tax Control System
From August 1, 2013, general taxpayers providing freight transportation services shall use the tax control system for issuance of special VAT invoices.
From September 1, 2013, small-scale taxpayers in Beijing shall use golden tax disks or tax control disks for issuing ordinary invoices, and tax declaration disks for purchasing and collecting invoices and filing tax returns.
Maximum Amount of a Special VAT Invoice
The maximum amount of a special VAT invoice shall be approved by the tax authority at the county or district level. When applying for the maximum amount of a special VAT invoice, the general taxpayer shall fill in the relevant application forms with the competent tax authority who will then conduct on-site inspections to decide whether to approve the amount or not (based on the actual business operation and sales amount of the taxpayer).
Issuance of Special Invoices for Freight Transportation
General taxpayers shall use special invoices for their taxable freight transportation services, and shall not use such invoices for other taxable services, tax exempted services, or other taxable services not subject to VAT.
The Announcement is scheduled to take effect on August 1, 2013.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
You can stay up to date with the latest business and investment trends across China by subscribing to Asia Briefing’s complimentary update service featuring news, commentary, guides, and multimedia resources.
The China Tax Guide: Tax, Accounting and Audit (Sixth Edition)
This edition of the China Tax Guide, updated for 2013, offers a comprehensive overview of the major taxes foreign investors are likely to encounter when establishing or operating a business in China, as well as other tax-relevant obligations. This concise, detailed, yet pragmatic guide is ideal for CFOs, compliance officers and heads of accounting who need to be able to navigate the complex tax and accounting landscape in China in order to effectively manage and strategically plan their China operations.
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.