Written by Spring Lin, Accounting and Tax, CW CPA
To further reduce taxpayers’ VAT burden, in 20 March 2019, the Ministry of Finance, State Administration of Taxation and General Administration of Customs jointly issued “Administration and the General Administration of Customs” (Hereinafter referred to as Announcement  No. 39.)
The specific VAT reduction policies are summarized as below:
- VAT Rates for General Taxpayers
For general VAT payers’ sales activities or imports that are subject to VAT at an existing applicable rate of 16% or 10%, the applicable VAT rate is adjusted to 13% or 9% respectively.
- Purchase of Agricultural Products
For the agricultural products purchased by taxpayers to which an existing 10% deduction rate is applicable, the deduction rate is adjusted to 9%; and for the agricultural products purchased by taxpayers for production or commissioned processing, which are subject to VAT at 13%, the input VAT will be calculated at a 10% deduction rate.
- Export Tax Refund
For the exportation of goods or labor services that are subject to VAT at 16%, with the applicable export refund at the same rate, the export refund rate is adjusted to 13%; and for the exportation of goods or cross-border taxable activities that are subject to VAT at 10%, with the export refund at the same rate, the export refund rate is adjusted to 9%.
- VAT Refund for Goods Purchased by Overseas Visitors
For the goods purchased by overseas visitors to which the applicable VAT rate is 13%, the departure tax refund rate is 11%; and for the goods purchased by overseas visitors to which the applicable VAT rate is 9%, the departure tax refund rate is 8%.
- No Input VAT on The Immovable Properties or The Immovable Properties Under Construction In Progress Obtained By Taxpayers may be credited any longer in two years.
No input VAT on the immovable properties or the immovable properties under construction in progress obtained by taxpayers may be credited any longer in two years. However, the input VAT to be credited that has not been fully credited yet according to aforesaid provisions may be credited against the output tax in the tax period from April 2019.
- Purchase of Domestic Passenger Transport Services
From 1 April 2019, taxpayers who purchase domestic passenger transport services can offset the input VAT against output VAT.
Generally, taxpayers should obtain special VAT invoice upon purchase of domestic passenger transport services. If the taxpayer fails to obtain a special VAT invoice, its input VAT should be determined for a time according to the provisions below:
- Provision of Production and Livelihood Services
From 1 April to 31 December 2021, any General Taxpayer whose sales from providing postal services, telecommunications services, modern services or livelihood services (hereinafter referred to as “Four Services”) accounts for more than 50% of its total sales can have a 10% weighted deduction of creditable input VAT in the current period from the tax amount payable (hereinafter referred to as the “Weighted Deduction Policy”).
General definition of the “Four Services”
As from 1 April 2019, the Weighted Deduction Policy applies to:
- any taxpayer incorporated before March 31, 2019 if its sales of the Four Services in the period from April 2018 to March 2019 (sales of the actual operation period if its business operation lasts for less than 12 months) accounts for more than 50% of its total sales.
- any taxpayer incorporated on or after April 1, 2019 from the date when it is registered as a general taxpayer if its sales of Four Services accounts for more than 50% of its total sales within three months from the date of incorporation.
- Pilot System for Refunding the Period-End Excess VAT Paid
Effective from 1 April 2019, the enterprise may apply a refund of its incremental overpaid VAT if the enterprise shall meet all the criteria as below:
- From the tax period of April 2019, the incremental overpaid VAT for each of six consecutive months (two consecutive quarters if taxed quarterly) is a positive number, and the incremental overpaid VAT in the sixth month is not less than 500,000 yuan;
- The enterprise’s taxation credit is rated as A or B;
- The enterprise has not committed fraud for overpaid VAT refund or export refund or falsely issued special VAT invoices for 36 months before its claim for VAT refund;
- The enterprise has not been penalized by tax authorities for two or more times for tax evasion for 36 months before its claim for VAT refund; and
- The enterprise fails to enjoy the policy of “refund upon levy” or “refund-after-levy” from April 1, 2019.
For more information, please feel free to contact:
Head of PRC Accounting Services