Provisional Regulations on Value-Added Tax of the Peoples Republic of China
Article 1 All units and individuals, within the territory
of the People's Republic of China, who are engaged in the
sales of goods, provision of processing, repair and replacement
services, and the import of goods, are persons liable to pay
Value-Added Tax ( hereinafter referred to simply as "taxpayers"),
and shall pay VAT in accordance with these Regulations.
Article 2 VAT Rates:
A. For taxpayers selling or importing goods, other than those
stipulated in items (2) and (3) of this Article, the tax rate
shall be 17%.
B. For taxpayers selling or importing the following goods,
the tax rate shall be 13%:
a. Food grains, edible vegetable oils;
b. Tap water, heating, air conditioning, hot water, coal
gas, liquefied petroleum gas, natural gas, methane gas, coal/charcoal
products for household use;
c. Books, newspapers, magazines;
d. Feeds, chemical fertilizers, agricultural chemicals, agricultural
machinery and covering plastic-film for farming;
e. Other goods as regulated by the State Council.
C. For taxpayers exporting goods, the tax rate shall be 0%,
except as otherwise stipulated by the State Council.
D. For taxpayer providing processing, repair and replacement
services (hereinafter referred to as "taxable services"),
the tax rate shall be 17%.
Any adjustments to the tax rates shall be determined by the
State Council.
Article 3 For taxpayers dealing in goods or providing taxable
services with different tax rates shall be accounted for separately.
If the sales amounts have not been accounted for separately,
the higher tax rates shall apply.
Article 4 Except as stipulated in Article 13 of these Regulations,
for taxpayers engaged in the sales of goods or the provision
of taxable services (hereinafter referred to as "selling
goods or taxable services" ), the tax payable shall be
the balance of output tax for the period after deducting the
input tax for the period. The formula for computing the tax
payable is as follows:
Tax payable = Output tax payable for the period-Input tax
for the period
If the output tax for the period is less than and insufficient
to offset against the input tax for the period, the excess
input tax can be carried forward for set-off in the following
periods.
Article 5 For taxpayers selling goods or taxable services,
the output tax shall be the VAT payable calculated based on
the sales amounts and the tax rates prescribed in Article
2 of these Regulations and collected from the purchasers,
The formula for computing the output tax is as follows:
Output tax =Sales amount × Tax rate
Article 6 The sales amount shall be the total compensation
and all other charges received from the purchasers by the
taxpayer selling goods or taxable services, but excluding
the output tax due.
The sales amount shall be calculated in Renminbi. The sales
amount of the taxpayer settled in foreign currencies shall
be converted into Renminbi according to the exchange rate
prevailing in the foreign exchange market.
Article 7 Where the price used by the taxpayer in selling
goods or taxable services is obviously low and without proper
justification , the sales amount shall be determined by the
competent tax authorities.
Article 8 For taxpayers who purchase goods or receive taxable
services (hereinafter referred to as "purchasing goods
or taxable services"), VAT paid or borne shall be restricted
to the amount of VAT payable as indicated on the following
VAT deduction documents:
The input tax allowed for deduction from output tax, apart
from the situations specified in Paragraph 3 of this Article, is limited to the VAT amounts noted on the deduction
documents listed below.
A. VAT indicated in the special VAT invoices obtained from
the sellers;
B. VAT indicated on the tax payment receipts obtained from
the customs office.
The deductible input tax for the purchasing of tax exempt
agricultural products is calculated based on a deemed deduction
rate at 10% on the actual purchasing price. The formula for
calculating the input tax is as follows:
Input tax = Purchasing price ×Deduction rate
Article 9 Where taxpayers purchasing goods or taxable services
have not obtained and kept the VAT deduction documents in
accordance with the regulations, or the VAT payable and other
relevant items in accordance with the regulations are not
indicated on the VAT deduction document, no input tax shall
be deducted from the output tax.
Article 10 Input tax on following items shall not be deducted
from the output tax:
A. Fixed assets purchased;
B. Goods purchased or taxable services used for non-taxable
items;
C. Goods purchased or taxable services used for tax exempt
items;
D. Goods purchased or taxable services used for group welfare
or personal consumption;
E. Abnormal losses of goods purchased;
F. Goods purchased or taxable services consumed in the production
of work-in-progress or finished goods which suffer abnormal
losses.
Article 11 Small-scale taxpayers engaged in selling goods
or taxable services shall use a simplified method for calculating
the tax payable.
The standard for small-scale taxpayers is determined by the
Ministry of Finance.
Article 12 The rate levied on the small-scale taxpayers goods
or taxable services shall be 6%.
Any adjustment to tax rates shall be determined by the State
Council.
Article 13 For small-scale taxpayers selling goods or taxable
services, the tax payable shall be calculated on the sales
amount and the tax rate stipulated in Article 12 of these
Regulations. No input tax shall be deducted. The formula for
calculating the tax payable is as follows:
Tax payable = Sales amount ×Tax rate.
The sales amount shall be determined in accordance with Article
6 and Article 7 of these Regulations.
Article 14 Small-scale taxpayers with sound accounting who
can provide accurate taxation information may, upon the approval
of the competent tax authorities, not be treated as small-scale
taxpayers. The tax payable shall be computed pursuant to the
relevant stipulations of these Regulations.
Article 15 For taxpayers importing goods, tax payable shall
be computed based on the composite assessable price and the
tax rates prescribed in Article 2 of these Regulations. No
tax will be deducted. The formulas for computing the composite
assessable price and the tax payable are as follows:
Composite assessable price = Customs dutiable value + Customs
Duty + Consumption Tax
Tax payable = Composite assessable price × Tax rate
Article 16 The following items are exempt from VAT:
A. Self-produced agricultural products sold by agricultural
producers;
B. Contraceptive medicines and devices;
C. Antique books;
D. Importation of instruments and equipment directly used
in scientific research, experiment and education;
E. Importation of materials and equipment from foreign governments
and international organizations as assistance free of charge;
F. Equipment and machinery required to be imported under
contract processing, contract assembly and compensation trade;
G. Articles imported directly by organizations for the disabled
for special use by the disabled;
H. Sale of goods which have been used by the sellers.
Except as stipulated in the above paragraph, the VAT exemption
and reduction items shall be regulate d by the State Council.
Local governments or departments shall not regulate any tax
exemption or reduction items.
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