Circular of the SAT on Revising the Quoted Clauses of Laws and Regulations in Se

The taxation bureaus of provinces, autonomous regions, municipalities under the Central Government and separately planning cities,

The Interim Regulations of the People’s Republic of China on Value-added Tax (No.538 Degree of the State Council) and the Detailed Rules for Implementing the Interim Regulations of the People’s Republic of China on Value-added Tax (No. 50 Degree of the Ministry of Finance and the State Administration of Taxation) have entered into force since Jan. 1, 2009. Since the quoted regulations and detailed rules in some regulatory documents on value-added tax promulgated by the State Administration of Taxation before that date have been changed, those regulatory documents have to be revised according to the amended regulations and detailed rules. Such relevant revisions are hereby stated as follows:

Article 1 “in accordance with Article 6 of the Detailed Rules for Implementing the Interim Regulations on Value-added Tax and Article 6 of the Detailed Rules for Implementing the Interim Regulations on Business Tax” prescribed in Article 2 of the Circular of the State Administration of Taxation on Issues concerning Collection of Circulation Tax in Catering Services (Guo Shui Fa [1996] No.202) has been revised as “in accordance with Article 7 of the Detailed Rules for Implementing the Interim Regulations on Value-added Tax and Article 8 of the Detailed Rules for Implementing the Interim Regulations on Business Tax”.

Article 2 “Value-added tax may be imposed on the biological products and medical apparatus allocated by sanitary and anti-epidemic stations at the rate of 4% as small-scale business enterprises in accordance with Article 24 of the Detailed Rules for Implementing the Interim Regulations of the People’s Republic of China on Value-added Tax and relevant provisions” as prescribed in the Reply of the State Administration of Taxation concerning Collection of Value-added Tax from Biological Products and Medical Apparatus Allocated by Sanitary and Anti-epidemic Stations (Guo Shui Han [1999] No.191) has been revised as “Value-added tax may be imposed on the biological products and medical apparatus allocated by sanitary and anti-epidemic stations at the rate of 3% as small-scale taxpayers in accordance with Article 29 of the Detailed Rules for Implementing the Interim Regulations of the People’s Republic of China on Value-added Tax and relevant provisions”.

Article 3 “At the tax rate of 6% for small-scale taxpayers” prescribed in Article 1 of the Reply of the State Administration of Taxation to Issues concerning Taxes Imposed on the Sale of Exhibits of Foreign Enterprises after Exhibition in China (Guo Shui Han [1999] No. 207) has been revised as “at the tax rate of 3% for small-scale taxpayers”.

Article 4 “Article 30 of the Detailed Rules for Implementing the Interim Regulations of the People’s Republic of China on Value-added Tax provides that ‘General taxpayers in any of the following circumstances shall calculate its/his tax payable based on the sales amount and according to the VAT rates, but no input tax can be credited against output tax and special VAT invoices shall not be used : ‘(1) The accounting systems are unsound or fail to provide accurate tax information ; or (2) The taxpayer satisfies the conditions of general taxpayers but has not applied for the procedures of confirmation as general taxpayers’” as prescribed in the Reply of the State Administration of Taxation to Issues after the Resumption of Qualification of General Taxpayers for Offsetting Input Tax (Guo Shui Han [2000] No.584) has been revised as “Article 34 of the Detailed Rules for Implementing the Interim Regulations of the People’s Republic of China on Value-added Tax provides that ‘The General taxpayers in any of the following circumstances shall calculate its/his tax payable based on the sales amount and according to the VAT rates, but no input tax can be credited against output tax and special VAT invoices shall not be used : (1) The accounting system of general taxpayers are unsound or fail to provide accurate tax information ; or (2) Except as otherwise stipulated in Article 29 herein, the sales amount of a taxpayer exceeds the standards of small-scale taxpayer but the taxpayer has not applied for the procedures of confirmation as general taxpayers’.”

Article 5 “Article 21 of the Detailed Rules for Implementing the Interim Regulations of the People’s Republic of China on Value-added Tax provides that ‘Abnormal losses refer to the losses arising from other than normal depreciation in production and operation’” as prescribed in the Reply of the State Administration of Taxation to Issues concerning the Offset of Input Tax from Loss of Current Assets Incurring from Depreciation in Asset Appraisal in Reorganization of Enterprises (Guo Shui Han [2002] No.1103) has been revised as “Article 24 of the Detailed Rules for Implementing the Interim Regulations of the People’s Republic of China on Value-added Tax provides that ‘The abnormal losses refer to the losses due to theft, spoilage or deterioration resulting from improper management’.”

Article 6 The “Provisions of Article 18 of the Detailed Rules for Implementing the Interim Regulations of the People’s Republic of China on Value-added Tax” prescribed in Article 2 of the Reply of the State Administration of Taxation to Issues after Adjustment of the Stating Point of Taxation for Value-added Tax (Guo Shui Han [2003] No. 1396) has been revised as the “Provisions of Article 17 of the Detailed Rules for Implementing the Interim Regulations of the People’s Republic of China on Value-added Tax”.

Article 7 The provision that any enterprise increasing its purchase of special invoices shall pay value-added tax at the rate of 4% of the sales of the special invoices in advance in Paragraph 3 of Article 3 of the Urgent Circular of the State Administration of Taxation on Issues concerning Enhancing of the Administration on Collection of Value-added Tax from Newly-established Business Enterprises (Guo Shui Fa Ming Dian [2004] No. 37) has been revised accordingly as “pay value-added tax at the rate of 3% of the sales of the special invoices in advance”.

Article 8 The provision that general taxpayers increasing their purchase of special invoices for value-added tax shall pay tax at 4% in advance during the guidance period in Paragraph 1 of Article 7 of the Supplementary Circular of the State Administration of Taxation on Issues concerning Enhancing of the Administration on Collection of Value-added Tax from Newly-established Business Enterprises (Guo Shui Fa Ming Dian [2004] No. 62) has been revised accordingly as “pay tax at 3% in advance”.

Article 9 The “rate of value-added tax shall be 4% (for commerce) or 6% (for others)” as prescribed in Article 1 of the Circular of the State Administration of Taxation on Issues after Cancellation of Examination and Approval on Issuance of Special Invoices for Value-added Tax by Taxation Bureaus on behalf of Small-scale Enterprises for Their Sale of Goods or Provision of Taxable Services (Guo Shui Han [2004] No. 895) has been revised accordingly as the “rate of value-added tax shall be 3%”.

Article 10 “In accordance with the provisions of Article 30 of the Detailed Rules for Implementing the Interim Regulations of the People’s Republic of China on Value-added Tax” prescribed in Article 1 of the Circular of the State Administration of Taxation on Enhancing the Administration on Taxation in Coal Industry (Guo Shui Fa [2005] No. 153) has been revised as “in accordance with the provisions of Article 34 of the Detailed Rules for Implementing the Interim Regulations of the People’s Republic of China on Value-added Tax.”

Article 11 The “vouchers for payment of tax of taxpayers received from the customs” and “valid customs vouchers for payment of tax for import of goods” prescribed in the Circular of the State Administration of Taxation on Issues concerning Offset of the Input Amount of Value-added Tax on Goods Imported by Taxpayers (Guo Shui Han [2007] No. 350) have been revised as the “special document for payment of value-added tax of taxpayers received from the customs” and the “special document for payment of value-added tax for valid import of goods” respectively.

State Administration of Taxation