China Releases VAT Calculation and Payment Measures for Head Offices and Branches

Posted by Reading Time: 4 minutes

Nov. 12 – China’s Ministry of Finance and the State Administration of Taxation jointly released the revised “Interim Measures on the Calculation and Payment of Value-Added Tax (VAT) for Head Offices and their Branches under the Business Tax to VAT Pilot Conversion (caishui [2013] No. 74, hereinafter referred to as “Measures”)” on October 24, which specify the VAT calculation and payment measures for head offices and their branches under the nationwide tax reform. Detailed information can be found below.

Calculation Method

The head office shall calculate the VAT payable for the businesses listed in the Annotations of Taxable Services Scope conducted by the head office and its branches on a consolidated basis, and pay such taxes to the competent tax authority at its domicile after deducting the amount of VAT already paid by its branches for the businesses listed in the Annotations of Taxable Services Scope.

The head office shall declare and pay the VAT for sales of goods and provision of processing and repairing services with the local tax authorities according to the VAT interim measures and relevant provisions.

VAT Taxable Sales Revenue

According to the Measures, the VAT taxable sales revenue consolidated by a head office refers to the VAT taxable sales revenue obtained by the head office and its branches from the businesses listed in the Annotations of Taxable Services Scope.

Output Tax

Output tax consolidated by the head office shall be calculated based on the VAT taxable sales revenue and the applicable VAT rate.

Input Tax
Input tax consolidated by the head office refers to the VAT paid or borne by the head office and its branches for goods purchased or processing, repairing and replacement services and taxable services received for conducting the businesses listed in the Annotations of Taxable Services Scope. Input tax of businesses other than those listed in the Annotations of Taxable Services Scope conducted by the head office and its branches shall not be consolidated.

VAT Payable
The VAT payable for businesses listed in the Annotations of Taxable Services Scope conducted by branches shall be calculated as following:

  • VAT payable = VAT taxable sales revenue × pre-levy rate

The pre-levy rate shall be stipulated by the Ministry of Finance and the State Administration of Taxation, and may be adjusted accordingly.

Branches shall declare and pay the VAT for sales of goods and provision of processing and repairing services with the local tax authorities according to the VAT interim measures and relevant provisions.

Moreover, VAT paid in the current period for businesses listed in the Annotations of Taxable Services Scope by branches may be offset against the VAT payable in the current period by the head offices. Any remaining balance after the offset may be carried forward to the next period for offsetting.

The Measures also provide that the consolidation of tax payments by head offices and their branches for the last year shall be settled after the first tax declaration period of each year. The head offices and their branches shall calculate the annual VAT payable based on the percentage of respective sales revenue and the VAT payable for the last year consolidated by head offices.

Where the VAT prepaid by a branch exceeds its annual VAT payable after the settlement, the pre-paid VAT for the coming tax declaration period shall be suspended. Where the VAT prepaid by a branch is less than its annual VAT payable after the settlement, the difference shall be recovered and handed over to the treasury in the coming tax declaration period by the branch.

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.

For further details or to contact the firm, please email asia@dezshira.com, visit www.dezshira.com, or download the company brochure.

You can stay up to date with the latest business and investment trends across Asia by subscribing to Asia Briefing’s complimentary update service featuring news, commentary, guides, and multimedia resources.

Related Reading

China-Tax-Guide-2013-thmbThe 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.

China Clarifies New VAT Exemptions Applied to Cross-Border Services

China Clarifies Scope of Taxable Services Subject to Zero-Rated Value-Added Tax

China Clarifies Tax Collection Issues Under Nationwide Tax Reform

China Releases Tax Policies for Nationwide VAT Pilot Reform Adoption

China to Expand VAT Reform Nationwide Starting August 1, 2013

MOF, SAT Interview on China Tax Reforms

China Issues Announcement on Value-added Tax Declaration

China’s VAT Reform Saves Taxpayers RMB40 Billion

China Clarifies VAT General Taxpayer Recognition Under Nationwide Reform