EN | 中文
EN | 中文
Under the Guo Shui Han [1999] No.264, products subject to VAT refund have been expanded, and the VAT refund rate on exports ranges from 5% to 17%.
1.What is the scope of Chinese Value-Added Tax (VAT)?
Value-Added Tax (VAT) is levied on both domestic and foreign enterprises in China on the transfer of taxable goods and services at each stage of the production process.
VAT is levied on sales by producers, wholesalers and retailers as well as at the retail level whereby goods and services are sold to the end consumer. Commercial activities known as “mixed sales activities” which involve the sale of goods and certain services may also attract either VAT or business tax liabilities.
2.What is the VAT rate in China?
The general VAT rate levied on the sale or import of goods and the provision of processing, repair and installation services is 17%. A lower rate of 13% applies to goods such as books, newspapers, magazines, cereals, edible vegetable oils, tap water, heaters, coal products for residential use and other goods as prescribed by the State Council.
In respect of goods sold by certain small scale taxpayers, a special VAT rate of 3% is applied.
According to Caishui [2013] No.106 & Caishui [2014] No.43, service industries that were originally subject to Business tax are now subject to VAT instead.
The applicable Service VAT rates are as follows:
Intangible Movable Property Leasing Services 17%
Transportation Services 11%
Postal Services 11%
Basic Telecommunications Services 11%
Value-Added Telecommunications Services 6%
Research, Development & Technical Services 6%
Information Technology Services 6%
Cultural & Creative Services 6%
Logistics Auxiliary Services 6%
Certification & Consulting Services 6%
Broadcasting, Cinematic & Television Services 6%
3.How is VAT Calculated?
In respect of general taxpayers, VAT is calculated by deducting the amount of VAT paid on goods and services purchased by the taxpayers (“Input VAT”) from the VAT on the sale of goods and services (“Output VAT”). If the total output VAT for the current period is less than the deductible input VAT, the balance may be carried forward and offset in later periods. Output VAT is calculated in RMB and may be collected by the taxpayer from the purchaser.
For sales value in foreign currency, the taxpayer must use the prevailing foreign exchange rate quoted by the State to convert the sales value into RMB.
4.How to apply for the VAT refund?
Cai Shui [2012] No.39 specifies the measures to apply for the VAT refund for exported goods and services, and the computational formulas to compute and calculate the refund.
5.How to make deductions for Input VAT?
To deduct Input VAT, the taxpayer must have the requisite withholding certificates, i.e. special VAT invoices obtained from the seller or tax certificates obtained from Customs. The special VAT invoices need to be verified within 180 days after issuance.
6.Is all Input VAT deductible?
Not all input VAT is deductible.
Some examples of Input VAT that are deductible are:
• The amount of Input VAT printed on the VAT invoice acquired from the seller.
• The amount of Input VAT printed on the paid import VAT receipt acquired form Customs.
• Input tax on the purchase of agricultural products is calculated by multiplying 13%.
Some examples of those Input VAT that are not deductible:
• Non-VATable Goods and services, VAT exempted activities, welfare, and personal consumption.
• Goods and services with abnormal losses.
7.When returning goods, should I also return the Special VAT Invoice?
Yes, otherwise VAT refunds will not be available to the taxpayer. Therefore, when a buyer returns goods, the taxpayer must ensure that the special VAT invoice is also returned.
