Value Added Tax, China Tax Advisory - Conpak CPA Limited

Value Added Tax

Value added tax is a kind of turnover tax imposed on the newly-increased value; that is, the additional value of goods in various links from commodity production to circulation. All corporations and persons engaged in the sales or importation of goods, provision of processing, repairs and replacement services within the territory of the People's Republic of China are taxpayers of Value Added Tax (hereinafter referred to as "taxpayers").

Scope of Charge

  • The sales of goods
  • The provision of processing, repairs and replacement
  • The importation of goods

Basis of Assessment

It is based on the sales amount; that is, all money received from purchasers by taxpayers selling the goods or providing the taxable services.

Tax Rate

Value added tax payers comprise general taxpayers and small-scale taxpayers

  • The VAT rate is 6%, 9%, 13% for general taxpayers
  • The VAT rate is 3% for small-scale

Computation of Tax Payable

  • Tax Payable by General Taxpayers=Tax Payable on Sales in Current Period - Tax Payable on Purchase in Current Period, where
  • 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
  • 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.
  • Tax Payable by Small-scale Taxpayers = Tax-including Sales Amount ÷ (1+Tax Rate)× Tax Rate
  • Tax Payable by Taxpayers Exporting Goods = (Dutiable Value +Tariff+Excise Tax) × Tax Rate

Intermediate Links of Taxation

  • Sales link
  • Processing link
  • Import link

Exportation Policies

  • Productive enterprises and foreign-trade enterprises empowered to manage exportation are entitled to free export and refund on their value added taxes
  • Small-scale taxpayers are entitled to free export but no refunds
  • Taxpayers exporting goods restricted by the Country are not entitled to free exports or refunds

Assessable period

The assessable period for tax payment is usually one month or one quarter. The specific period shall be determined by the competent tax authority according to the amount of tax payable.

Export tax rebates

General taxpayers who have obtained the right of import and export may enjoy export tax rebates if they export the duty-free goods or the goods under export restriction and prohibition as specified in the tax law. Small-scale taxpayers are not entitled to export tax rebates.

Tax Preferences

  • From 1 January 2023 to 31 December 2027, if the total monthly sales amount of a small-scale taxpayer does not exceed RMB 100,000 (for a small-scale taxpayer whose assessable period is one quarter, if its total quarterly sales amount does not exceed RMB 300,000, the same below), or if the total monthly sales amount is less than RMB 100,000 after deducting the sales amount of real estate occurring in the current period, the VAT shall be exempted
  • For a small-scale taxpayer who exceeds the above limits, the taxable sales income applicable to a 3% levy rate shall be subject to the VAT at 1%; the pre-paid VAT items applicable to a 3% pre-levy rate shall be subject to the VAT at 1%
  • Where a general VAT payer sells the integrated circuits or software products produced by itself, the policy of tax refund upon collection applies to the part exceeding 3% of actual tax burden.
  • Agricultural products, grain and oil, coal gas and chemical fertilizers shall be taxed at the rate of 9%.

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