By Pingwen Hu, ECOVIS RUIDE CHINA, Shanghai<\/p>\n
The pilot VAT reform policy initialized in Shanghai from January 1, 2012 will finally be pushed to nationwide. Recently, the Ministry of Finance and the State Administration of Taxation has announced CaiShui [2013] No.37, \u201cthe Circular on Tax Policies in the Nationwide Pilot Collection of Value Added Tax in Lieu of Business Tax in the Transportation Industry and Certain Modern Services Industries\u201d, which would be carried out from August 1, 2013. Although a large number of related policies will be abolished and replaced, in general contents, there is little difference between the new policy in CaiShui [2013] and the pilot policy already implemented by certain provinces and municipalities.<\/p>\n
Certain regulations, which were set to eliminate the regional difference between \u201cpilot area\u201d and \u201cnon-pilot areas\u201d, have no existence necessity and would be cancelled under the new policy.<\/p>\n
Introduction of new contents<\/b><\/p>\n
Following the main adjustment in the new policy are listed out\uff1a<\/p>\n
1)\u00a0\u00a0\u00a0\u00a0 Originally, the taxable service under the pilot reform policy include the service of land transportation, marine transportation, air transport, pipeline transportation, R&D and technical services, information technology services, culture creativity services, logistics supporting services, Tangible Personal Property leasing services, identification and consulting services. The \u201cradio, television and film services\u201d has also been added to the taxable service. (following are combined to be mentioned as \u201ctaxable service\u201d)<\/p>\n
Note 1:<\/b>\u00a0 The specific scope of taxable services shall be carried out according to the \u201cAnnotations of Taxable Services Scope\u201d enclosed in CaiShui [2013] No.37, which has little changes compared with the replaced regulations.<\/p>\n
2)\u00a0\u00a0\u00a0\u00a0 The scope of deductible Input-VAT has been further clarified. The \u201ctax-control uniform invoice for the sales of motor vehicles\u201d has been added as one type of deductible Special VAT invoice. In addition, the calculation method for VAT deduction would be limited to the sole scenario of \u201cacceptance of railway transportation service\u201d (the deductible input VAT is calculated by 7% of the transport invoice amount)<\/p>\n
Note 2:<\/b> The new policy has cancelled the limit for the Input-VAT deduction on \u201cMotorcycles, cars and yachts which consumption tax is payable\u201d, and it indicates that if the purchased car is used for normal operation and the tax-control Special VAT invoice is obtained, the input-VAT is allowed to be deducted.<\/p>\n
Previously, the transportation service provider in the \u201cnon-pilot areas\u201d could not issue the special VAT invoice. For their clients, the ordinary invoice issued by them is deductible by calculating 7% of the invoice amount. Along with the nationwide implementation of the pilot policy, the regional difference would disappear.\u00a0 All the transportation service providers (except for railway) in different areas have been included in the pilot policy and could self-issue or apply to issue the deductible Special VAT invoice to its clients.\u00a0 Therefore, the calculation method would solely apply to the railway transportation service.<\/p>\n
3)\u00a0\u00a0\u00a0\u00a0 For calculation the VAT payables, the Treatment of \u201cBalance Taxation\u201d, deducting certain cost\/expenses from taxable income, would also be limited to the sole scenario of \u201cFinancing lease of Tangible Personal Property\u201d, due to the reason that most of the input-VAT for such industry\u2019s cost could not be obtained.<\/p>\n
Note 3:<\/b> The Treatment of \u201cBalance Taxation\u201d would be abolished. For certain taxpayers, the tax burden would be increased. For example, the exhibition hall rental fee paid by the Exhibition organizers, and the internal freight charges paid by the Class A forwarder, would not be deductible from its income any more, these taxpayer also could not obtain the corresponding Special VAT invoice for deduction.<\/p>\n
And at the current stage, it is unknown whether any other policy would be introduced later.<\/p>\n
4)\u00a0\u00a0\u00a0\u00a0 Where a taxpayer provides taxable services for which the rules of exemption and zero tax rate shall apply, the zero tax rate shall be applied in priority.<\/p>\n
Other newly published circulars related with the pilot policy mainly include:<\/p>\n
(1)\u00a0\u00a0 Announcement of the State Administration of Taxation on Qualification Recognition for General VAT Taxpayers under the Pilot Collection of Value Added Tax in Lieu of Business Tax in the Transportation Industry and Certain Modern Service Industries (Announcement 2013 No. 28 of the State Administration of Taxation)<\/p>\n
(2)\u00a0\u00a0 Announcement on Issues concerning the Filing of Value-added Tax Returns by Head Offices and Branches as Pilot Taxpayers in the Pilot Collection of Value-added Tax in lieu of Business Tax (Announcement 2013 No. 22 of the State Administration of Taxation)<\/p>\n
The Announcement No. 22 applies to certain taxpayers, who could file VAT returns by head offices and their branches on a consolidated basis, and this policy is narrowly applicable, as these taxpayers should be approved by the Ministry of Finance and the State Administration of Taxation in advance. While the Announcement No.28 has further clarify the application of the General VAT Taxpayer\u2019s Qualification, which shall be paid attention to, especially for the newly established company, or small-scale taxpayer having the plan to apply for General VAT Taxpayer\u2019s Qualification.<\/p>\n
The main points are:<\/p>\n
The distinguish between \u201ccan\u201d and \u201cshould\u201d<\/p>\n
| Tax payers<\/td>\n | Obligation \u00a0 to apply for determination \u00a0 procedures of General VAT Taxpayer<\/td>\n<\/tr>\n |
| with an annual turnover of taxable services over RMB \u00a0 5 million<\/td>\n | \n should<\/p>\n<\/td>\n<\/tr>\n |
| with an annual turnover of taxable services below 5 \u00a0 RMB million<\/td>\n | \n can<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n (the annual turnover is the taxable service income within an operation period less than 12 months successively)<\/p>\n -If a taxpayer engaged in,<\/p>\n -sales of goods, provision of processing, repair and replacement service;<\/p>\n -or provision of taxable service;<\/p>\n The taxable sales amount of goods and labor and the taxable services shall be calculated separately, and the standards for the confirming of the qualification as general value-added tax payers shall be applied separately. It could be assessed as the General VAT Taxpayers if one type of sales has touched the corresponding criterion for sales volume.<\/p>\n Our opinions and suggestions<\/b><\/b><\/p>\n \u00a0<\/b><\/p>\n Along with the implementation of the new nationwide policy, the input-VAT for the purchased car would be deductible.\u00a0 As the calculation method for deducting input-VAT and the Treatment of \u201cBalance Taxation\u201d would be abolished, the tax treatment of General VAT taxpayer would be less complicate, e.g. for the Forwarding Industry.<\/p>\n However, the new policy is also a two-edged sword, which has increased the tax burden of the some taxpayers of special industry. As the new policy would have different affects on every individual enterprise, we suggest that companies should carefully assess policy changes impact on their own, and make preparation for the unfavorable factors if any.<\/p>\n What can we help?<\/b><\/b><\/p>\n Our professional consulting team and personnel can offer you consulting service of the above mentioned contents. The services include:<\/p>\n Check the transfer pricing situation of your company and analysis of the risks;<\/p>\n Information whether there is a need of the transfer pricing documentation;<\/p>\n Support to prepare the transfer pricing documentation.<\/p>\n For more detailed information, please contact our professional team.<\/p>\n","protected":false},"excerpt":{"rendered":" By Pingwen Hu, ECOVIS RUIDE CHINA, Shanghai The pilot VAT reform policy initialized in Shanghai from January 1, 2012 will finally be pushed to nationwide.<\/p>\n","protected":false},"author":10,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[798,33],"tags":[163,164,165,166,63,103,90,167,168],"class_list":["post-4776","post","type-post","status-publish","format-standard","hentry","category-blog","category-tax-policy","tag-calculation-vat","tag-pilot-area","tag-small-cale-taxpayer","tag-taxation","tag-value-added-tax","tag-vat","tag-vat-china","tag-vat-reform-china","tag-vat-return"],"acf":[],"yoast_head":"\n |