VAT tax declaration is required for enterprises and business individuals engaged in the sales or import of goods, provision of processing, repairs and replacement services within the territory of China. Value added tax is a kind of turnover tax imposed on the additional value of goods in various links from commodity production to circulation. The tax declaration is based on the sales amount, namely, all money received from purchasers by taxpayers selling the goods or providing the taxable services.
Supplies Subject to Chinese VAT
China levies VAT on a broad range of goods and services. This includes imports; however exports are exempt. Unusually, most financial services are liable to VAT, including deposit account interest. Also, sales of residential property between consumers is subject to VAT, unlike in most other countries. VAT is only applicable in mainland China. The Special Administrative Regions of Hong Kong and Macau are excluded.
Categories of Taxpayer
Under the VAT, taxpayers fall into one of two categories based on their annual taxable sales amount: general taxpayers or small-scale taxpayers. Taxpayers with annual taxable sales exceeding the annual sales ceiling set for small-scale taxpayers must apply for general taxpayer status. The sales ceilings are:
(1) RMB 500,000 for industrial taxpayers (i.e., enterprises primarily engaged in the manufacture of goods or provision of taxable services);
(2) RMB 800,000 for commercial taxpayers (i.e., enterprises engaged in the wholesale or retail of goods); and,
(3) RMB 5 million for VAT reform taxpayers.
Small-scale taxpayers are subject to a lower 3% uniform VAT rate; general taxpayers are subject to rates ranging from 6%-17%. However, small-scale taxpayers cannot credit input VAT from output VAT, nor are they entitled to VAT export exemptions and refunds.
Kindly note that starting from May 1, the tax rate is lowered from 17% to 16% for manufacturing and some other industries, and from 11% to 10% for transportation, construction, basic telecommunication services, and farm produce.
Computation of Tax Payable
1. Tax Payable by General Taxpayers=Tax Payable on Sales in Current Period － Tax Payable on Purchase in Current Period
2. Tax Payable by Small-scale Taxpayers = Tax-including Sales Amount ÷ (1＋Tax Rate）× Tax Rate
3. Tax Payable by Taxpayers Exporting Goods = (Dutiable Value ＋Tariff＋Excise Tax) × Tax Rate
Notes: (1) Tax Payable on Sales means the VAT computed received from the purchasers by the taxpayers selling goods or providing taxable services according to stipulated VAT rate;
(2) Tax Payable on Purchase means the VAT paid by the taxpayers purchasing goods or accepting taxable services, which in comparison with the foregoing Tax Payable on Sales received by the sellers, is paid by the purchasers.
Contact Us
If you have further queries, don’t hesitate to contact Tannet anytime, anywhere by simply visiting Tannet’s website english.tannet-group.com, or calling Hong Kong hotline at 852-27826888 or China hotline at 86-755-82143512 or 86-755-82143181 or emailing to tannet-solution@hotmail.com. You are also welcome to visit our office situated in 16/F, Taiyangdao Bldg 2020, Dongmen Rd South, Luohu, Shenzhen, China.
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