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VAT Small-scale Taxpayer VS VAT General Taxpayer

2023-07-04
Items VAT Small-scale Taxpayers VAT General Taxpayer
1

Application Criteria

1)  Company shall be ratified as VAT small-scale taxpayer when registration with no need for separate application;
2)  The company’s annual taxable sales shall not exceed RMB5 million.
1) The company shall apply for the qualification of VAT general taxpayer when its annual taxable sales reach or exceed RMB 5 million, if not apply, it shall be compulsorily ratified as VAT general taxpayer;
2) Newly registered company or company with annual taxable sales not exceeding RMB5 million can apply for the qualification of VAT general taxpayer if it has fixed operation place and can provide legal and valid vouchers and accurate tax filing data.
2

Tax and Levy Rate

The applicable levy rate is 3%.

The applicable tax rate is divided into four levels, 13%, 9%, 6% and 0% respectively.
3

Tax Filing Method

VAT and its surcharges shall be declared on quarterly basis.

VAT and its surcharges shall be declared on monthly basis.
4
Tax Calculation

Taxable Sales/(1+Levy Rate)*Levy Rate.

Output VAT – Input VAT.

5
Input VAT

Not deductible. The input VAT obtained for purchasing goods, assets and taxable service is not deductible even if VAT special invoice could be obtained.

Deductible. The input VAT as shown on the VAT special invoice for purchasing goods, assets and taxable service and the withholding VAT incurred for remitting payments to foreign companies is deductible.
6
Input VAT Accounting Treatment
The price and relevant VAT together shall be accounted as the total cost of assest or service purchased. Adopt “price and tax separated” policy. The price shall be posted into the accounts of assets, costs or expenses, while, the VAT shall be posted into the account of tax payable-VAT payable-input VAT, so as to offset output VAT.
7
Issuance of VAT Special Invoice
1) VAT small-scale taxpayer whose business scope covers accommodation, consultancy, construction, manufacturing, software, information transmission, information technology, rental, business service, science research, technology service, resident service, repair and other service can issue VAT special invoice by itself;
2) Other companies shall need to apply with tax bureau to issue VAT special invoice;
3) The VAT rate shown on the VAT special invoice shall be 3% for the invoice either issued by company itself or by tax bureau.
 VAT special invoice can be issued for goods selling or taxable service rendering and the rates shown on the invoice can be 13%, 9% or 6%, which is subject to the goods or service sold.
8
Export Tax Rebate
VAT shall be exempted for export business and no rebate can be applied. The applicable VAT rate is 0% for export business. Refund can be applied for the input VAT generated for purchasing of goods and taxable service and the rebate rate or amount of tax refund shall be subject to the category of the exported goods or service.
9
VAT Preferential Tax Policy
From 1 January 2019 to 31 December 2021, small-scale taxpayers with monthly sales not exceeding RMB100,000(quarterly sales no more than RMB300,000) can enjoy VAT exemption.
 1) From 1 April 2019 to 31 December 2021, taxpayers engaged in production & living service industry can use extra 10% of input VAT to offset against output VAT.
2) From 1 April 2019，qualified tax payers can apply for refund of incremental input VAT.
10
Urban Construction Tax preferential policy

1) Urban construction tax shall be exempted together with the exemption of VAT and the exemption criteria are the same as VAT.
2) From 1 January 2019 to 31 December 2021, small-scale taxpayers can pay 50% urban construction tax.

Urban construction tax shall be exempted together with the extra 10% of VAT.
11
Surcharges Tax Preferential Policy
1)  Surcharge taxex shall be exempted together with the exemption of VAT and the exemption criteria are the same as VAT.
2）From 1 January 2019 to 31 December 2021, small-scale taxpayers can pay 50% surcharge taxes.
 Surcharge taxes shall be exempted together with the extra 10% of VAT.
12
Corporate Income Tax Preferential Policy
From 1 January 2019 to 31 December 2021, small and low-profit enterprises with annual taxable income no more than RMB 1 million, the taxable income could be reduced to 25% and adopt 20% of tax rate when calculating corporate income tax; For annual taxable income ranging from RMB 1 to 3 million (including RMB 3 million), the taxable income could be reduced to 50% and adopt 20% of tax rate when calculating corporate income tax.
13
Applicable Enterprises
Applicable to those companies which cannot obtain VAT special invoice and will not issue VAT special invoice. Applicable to those companies which
1) need to issue VAT special invoice; or
2) have large amount of input VAT to offset output VAT; or
3) need to apply for VAT rebate for export business.


Note:
1. Annual taxable sales refer to the accumulated VAT taxable sales for no more than 12 consecutive months, including the tax exempted sales.
2. The criteria for small and micro enterprise:
  （1） Enterprises with annual taxable income of no more than RMB3 million; and
（2） Employees shall not exceed 300 heads and the total assets limit to RMB50 million.

Disclaimer

All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage.

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