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Less bureaucracy! No VAT General Tax Payer approval necessary

(March 18th, 2015)

By Grace Shi, ECOVIS Beijing


Do you hate bureaucracy? Learn how the changes regarding VAT General Tax Payer status approval and Special Red-ink VAT invoices will simplify your company’s VAT booking and filing.

On February the 24th 2015, the State Council of the People’s Republic of China issued A Decision on Matters of Cancelling and Adjusting Batches of Administrative Approval Items (“the Decision”).

The Decision covers 5 batches of administrative approval items, including vocational qualification and permission, adjusting administrative approval level, and changing of pre-approval items in legal entity incorporation procedures.There are two items relating to the administration of Value Added Tax (“VAT”).

The changes are as follows:

Item 25: Cancel approval for VAT General Tax Payer status approval
Item 26: Cancel examination and approval on Special Red-ink VAT invoice

Ecovis Observations:

The above changes of regulation at State Council level are good news for companies conducting business in China. China’s VAT system is operated largely on the monitoring of the Special VAT invoices (the “fapiao”), with a nationwide system called “Golden Tax System”. To qualify for using this system, a company needs to apply for the “VAT General Tax Payer” status.

The approval procedure is quite complicated and time consuming. The company needs to prepare commercial contracts, application letters and other documents to submit to the tax bureau. The tax bureau may even conduct physical visits onsite to the company. It usually takes 1-3 months to complete such approval procedures.

As China adopts the “Golden Tax System”, the Special VAT invoices are issued under this system using special designated machines and software. Once an invoice is issued, it cannot be cancelled automatically, but a special Red-ink Invoice needs to be issued to cancel the original one. The issue of a Red-ink Invoice should be approved by the tax bureau.

The cancellation of the two items above will ease companies’ processing of VAT booking and filing. It is a symbol of the development of a more efficient and transparent tax system, and is welcomed by companies.

We foresee that in the coming months, the State Administration of Taxation (“SAT”) will issue corresponding rules and circulars on these two items, to implement such changes. We will keep you updated on the SAT’s news.

Contact us to get more information on how this Decision can help you – call our office now at +86 10 6561 6609 – 806

grace 2 Grace Shi is a Partner at ECOVIS Beijing China. She has over 12 years of experience in accounting, auditing, and tax advisory services in both international accounting firms and large domestic corporations. She has an international MBA and US Global Finance Master’s degree. Since 2001 she is a Chinese Certified Public Accountant (CPA) and since 2002 a Chinese Certified Taxation Agent (CTA). Mrs Shi is one of the founders of ECOVIS R&G Consulting Ltd. (Beijing). She has perfect skills in written and spoken English and Chinese. For more information, please contact: grace.shi@ECOVIS.com
Ecovis Beijing is the trusted tax and legal advisor of several embassies and official institutions in China. It specializes in mid-sized international companies and focused on tax & legal advisory, accounting and auditing. If you’re interested in finding out more about tax and legal, don’t hesitate to sign up to our Newsletter or give us a call +86 10-65616609 (ext 811/806) or contact us directly via Beijing@ecovis.com
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