China's Import-VAT Payment Letter "Comparison & Deduction" Matters

With respect to the value-added tax (VAT) deduction over China Customs' Import VAT Special Payment Letter, the State Administration of Taxation and the General Administration of Customs hereto have decided to nationwide spread the adoption of "Comparison First and Deduction After" over the VAT Special Payment Letter.

Relevant matters are hereby announced:

1. As of July 1, 2013, with respect to the VAT Special Payment Letter acquired by ordinary taxpayers for their importation, only upon confirmation by the taxation authorities after their audit and comparison shall the VAT amount as input tax be deducted from output tax amount.

2. The import taxpayers shall, as per the taxation authority requirements (GuoShuiHan [2009] no.617), apply for comparison to the taxation authorities by submitting the electronic version of Customs Duty-Paid Proof Deduction List within 180 days from the issue date of the VAT Special Payment Letter;

Where the taxpayers fail to timely apply, their input tax amount shall not be deducted.

3. The taxation authorities may compare the submitted Special Payment Letter data with the registered Import VAT data by referring to each month as one auditing period.

4. The comparison may produce five results of being "compliant, discrepant, pending, missing, and duplicate" as per the definition by the taxation and customs authorities.

5. The taxation authorities shall, within each monthly declaration period, notify the taxpayers of the comparative results of one previous month; and the taxpayers shall inquire the taxation authorities for the comparative results information.

With respect to the compliant Special Payment Letter, the taxpayers shall declare for the deduction within the declaration period of the existing month; where the declaration is overdue, their input tax amount shall not be deducted.

6. Treatment for the abnormal results of the comparison:

(1) With respect to the Special Payment Letter with discrepant or missing data, the taxpayers shall, within the resulting 180 days, apply to the taxation authorities for data correction or verification based on the original Special Payment Letter;

In the case of the taxpayers' error in data collection, the data may be re-compared after their correction;

In the cases other than the data collection error, the taxation authorities may re-verify the data. If the data is confirmed compliant, the taxpayers shall re-declare for the deduction within a prescribed time limit.

(2) With respect to the Special Payment Letter with data duplication unwanted, the taxation authorities may conduct data verification; if the data is confirmed compliant, the taxpayers shall re-declare for the deduction within a prescribed time limit.

(3) With respect to the Special Payment Letter with pending data, the comparison may continue without the need of data verification.

7. The taxpayers shall set an "input tax amount to deduct" item under the "tax payable" title for the purpose of the accounting of pending input tax amount.

Following the acquisition of the Special Payment Letter, the taxpayers shall debit the "tax payable – input tax amount to deduct" item and credit relevant items; when permitted to deduct, they shall debit "tax payable – VAT (input tax) payable" item and credit the "tax payable – input tax amount to deduct" item; where the deduction is prohibited, they shall debit in red the "tax payable – input tax amount to deduct" item and credit in red the relevant items.

8. Adjustment of VAT Payment Declaration Form and Comparison Items

(1) As of July 1, 2013, the pending input tax amount shall be recorded in the "Customs' Import VAT Special Payment Letter" column in the Attachment 2 "input tax amount to deduct" of the Form of Declaration for VAT Payment (for ordinary taxpayers).

(2) As of August 1, 2013, the comparison items shall be adjusted to: verification that the tax amount in the 5th column in the Attachment 2 aforesaid is equal to or less than the tax amount deductable that is provided in the Special Payment Letter.

9. This Announcement shall enter into force on July 1, 2013 along with simultaneous repeals of the State Administration of Taxation's Notices of GuoShuiHan [2004] no.128, GuoShuiHan [2009] no.83 and GuoShuiHan [2011] no.196 in this regard.


The State Administration of Taxation of China

The General Administration of Customs of China (GACC)

June 14, 2013