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Taxation Policies |
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| Value Added Tax |
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1. Collection Scope and Taxpayers
(1) Collection Scope: VAT is collected on goods sold or provided processing, repair and assembly services in People's Republic of China as well as imported goods.
(2) Taxpayers: Taxpayers of VAT are organizations or individuals who sell goods in People's Republic of China or provide processing, repair and assembly services or import goods.
2. Table of Tax Items and Rates
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VAT Rate |
Applicable Scope |
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0 |
Exported goods (except for those that are separately prescribed by the State Council) |
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13% |
1. Food, cooking oil;2. Tap water, central heating, air conditioning, hot water, gas liquefied petroleum gas, natural gas, marsh gas, coal products used by residents;3. Books, newspapers, magazines;4. Forage, chemical fertilizer, farm chemical, agricultural machinery, agricultural film;5. Other goods prescribed by the State Council |
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17% |
Processing, repair and assembly service as well as the selling or importation of goods not included in 0 rate or 13% tax rate groups |
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6% |
Small scale taxpayers (excluding commercial enterprises) |
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4% |
Small scale commercial enterprises (who are required to go through an annual application and verification) |
4. Calculation of Input, Output and the Tax Payable
4.1 Input
Input refers to the VAT amount paid or born by the taxpayer for purchasing goods or accepting taxable services.
(1) Input can be rebated from output in the following situations:
1) VAT amount indicated on special VAT invoices received from the selling party.
2) VAT amount indicated on the "Duty Paid Certificate" provided by the Customs.
3) Calculation formula for Input tax-rebate for the purchase of tax-free agricultural products and worn-out materials as well as merchandise transportation fee is:
Input tax rebate=buying price (or transportation fee)*rebate rate
4) Approved by the State Council, starting from July 1,1998,the rebate rate for the transportation fee paid by VAT taxpayers for purchasing or selling taxable goods is reduced from 10% to 7%. All the transportation fee input declared for rebate after July 1,1998 should be computed with the 7% rebate rate no matter when the transportation invoice is issued or whether the indicated transportation fee is actually paid.
(2) Input cannot be rebated from output in the following situations:
1) Purchased fixed assets (cf. Chapter IV for the rebating incentives for foreign invested enterprises in the purchase of equipments made in China);
2) Purchased goods or taxable services for non-taxable projects;
3) Purchased goods or taxable services for tax-free projects;
4) Purchased goods or taxable services for collective welfare or individual consumptions;
5) Improper loss of purchased goods.
6) Improper loss of purchased goods or taxable services which are spent on products and semi-products.
4.2 Output
Output refers to the VAT amount that is calculated with the value of sales and VAT rate and collected by taxpayers from the buyers of goods or services when selling goods or providing taxable service.
(1) calculation formula: output amount=value of sales* VAT rate
(2) Calculation of sales of output:
The sales include the sum of price and other expenses received by taxpayers from buyers in the sales of goods or taxable service (not including the invoice of output).
4.3 Tax Payable
Tax Payable is the remaining sum of the current output less current input.
Calculation Formula:
Tax Payable =Current Output-Current Input
If the current output is less than the current input, the surplus input amount can be transferred to the next taxation period for deduction. |
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11℃-15℃
