Interim Regulation of the People’s Republic of China on Value Added Tax（2008）

[2009-01-07 12:13:55]

Interim Regulation of the People’s Republic of China on Value Added Tax（2008）

Promulgation date:	11-10-2008	Department:	State Council
Effective date:	01-01-2009	Subject:	New Taxation

Order of the State Council of the People’s Republic of China
(No. 538)

The Interim Regulation of the People’s Republic of China on Value Added Tax was amended and adopted at the 34th executive meeting of the State Council on November 5, 2008. The amended Interim Regulation of the People’s Republic of China on Value Added Tax is hereby promulgated and shall come into force as of January 1, 2009.

Premier Wen Jiabao
November 10, 2008

Interim Regulation of the People’s Republic of China on Value Added Tax
(Promulgated by Order No. 134 of the State Council of the People’s Republic of China on December 13, 1993 Amended and adopted at the 34th executive meeting of the State Council on November 5, 2008)

Article 1 Entities and individuals engaged in the sale of goods, supply of processing, repair and replacement services, and import of goods within the territory of the People’s Republic of China are taxpayers of value added tax (hereinafter referred to as “taxpayers” ), and shall pay VAT in accordance with this Regulation.

Article 2 VAT rates:
1. For taxpayers selling or importing goods, other than those as specified in Items 2 and 3 of this Article, the tax rate shall be 17%.
2. For taxpayers selling or importing the following goods, the tax rate shall be 13%.
(1) food grains, edible vegetable oil;
(2) tap water, heating, air conditioning, hot water, coal gas, liquefied petroleum gas, natural gas, methane, and coal/ charcoal products for household use.
(3) books, newspapers, magazines;
(4) feed, fertilizer, pesticide, agricultural machinery and agricultural film; and
(5) other goods as prescribed by the State Council.
3. For taxpayers exporting goods, the tax rate shall be zero, except as otherwise prescribed by the State Council.
4. For taxpayers supplying processing, and repair and replacement services (hereinafter referred to as “taxable service”), the tax rate shall be 17 %.
Any adjustments to the tax rates shall be decided by the State Council.

Article 3 For a taxpayer concurrently engaged in goods or taxable services at different tax rates, the sales amounts for goods or taxable services at different tax rates shall be calculated separately, otherwise, the higher tax rate shall apply.

Article 4 Except for the provisions in Article 11 of this Regulation, for a taxpayer engaged in selling goods or supplying taxable services, the payable tax amount shall be the balance after offsetting or deducting the input tax amount for the current period against or from the output tax amount for the current period. The formula for computing the payable tax amount:

the payable tax amount = the output tax amount for the current period – the input tax amount for the current period

If the output tax amount for the current period is less than and insufficient to offset against or deduct the input tax amount for the current period, the deficiency can be carried forward to the following period for offset or deduction.

Article 5 The VAT tax amount that a taxpayer selling goods or supplying taxable service calculates on the basis of the sales amount and at the tax rate as prescribed in Article 2 of this Regulation and collects from the buyer is the output tax amount. The formula for the calculation of the output tax amount:
the output tax amount = the sales amount × the tax rate

Article 6 The sales amount shall be the full price and ex-price fees that a taxpayer charges the buyer for selling goods or supplying taxable service, but exclude the output tax amount collected.
The sales amount shall be calculated in RMB. Where a taxpayer settles the sales amount in a currency other than RMB, it (he) shall convert it into RMB.

Article 7 If the price of the goods sold or taxable service supplied by a taxpayer is obviously low without a justifiable reason, the competent taxation organ shall verify and determine the sales amount.

Article 8 The VAT amount that a taxpayer pays or bears for buying goods or accepting taxable service is the input tax amount.
The following input tax amounts are allowed to be offset against or be deducted from the input tax amounts:
1. the VAT amount as indicated in the special VAT invoice obtained from the seller;
2. the VAT amount as indicated in the special bill of payment of import VAT obtained from the customs house;
3. for the purchase of agricultural products, besides obtaining the special VAT invoice or customs special bill of payment of import VAT, the input tax amount is calculated on the basis of the agricultural product purchase price as indicated in the agricultural product purchase invoice or sales invoice and at a deduction rate of 13%. The formula for the calculation of the input tax amount:
the input tax amounts = the purchase price × the deduction rate
4. For the purchase or sale of goods and payments for freight during the production and business operations, the input tax amount is calculated on the basis of the freight amount as indicated in the freight settlement voucher and at the deduction rate of 7%. The formula for the calculation of the input tax:
the input tax amount = the freight amount × the deduction rate
Any adjustments to the allowed deduction items and rates shall be decided by the State Council.

Article 9 For a taxpayer purchasing any goods or taxable service, if the VAT deduction voucher it (he) obtains does not conform to law, administrative regulation, or relevant provisions of the taxation administrative department of the State Council, the input tax amount shall not be offset against or deducted from the output tax amount.

Article 10 The input tax amount on any of the following items shall not be offset against or be deducted from the output tax amount:
1. the purchased goods or taxable services used for non-VAT taxable items, VAT-free items, collective welfare or individual consumption;
2. the abnormally lost purchased goods and relevant taxable services;
3. the abnormally lost purchased goods or taxable services for products under production or finished products;
4. the taxpayer’s self-use consumables as prescribed by the finance and taxation administrative departments of the State Council; and
5. the freight of goods and freight of sold tax-free goods as described in Items 1through 4 of this Article.

Article 11 For selling goods or taxable service of a small-scale taxpayer, a simple approach shall be employed to calculate the taxable amount on the basis of the sales amount and at the tax rate and the input tax amount shall not be offset or deducted. The formula for the calculation of the taxable amount:
the taxable amount = the sales amount × the tax rate
the criterions for small-scale taxpayers shall be formulated by the finance and taxation administrative departments of the State Council.

Article 12 The tax rate for the VAT on small-scale taxpayers shall be 3%.
Any adjustment to the tax rate shall be decided by the State Council.

Article 13 A taxpayer other than a small-scale taxpayer shall apply to the taxation administrative department for determination of its qualification. The concrete determination measures shall be formulated by the taxation administrative department of the State Council.
Where a small-scale taxpayer with independent accounting is able to provide accurate tax-related materials, it may apply to the competent taxation organ for determination of its qualification for not being treated as a small-scale taxpayer in the calculation of the payable tax amount under this Regulation

Article 14 For goods imported by a taxpayer, the payable tax amount shall be calculated on the basis of the composite assessable value and the tax rates as given in Article 2 of this Regulation. The formulas for the calculation of the composite assessable .....