Updated: 2017-11-19
Article 1 Entities and individuals engaging, within the territory of the People’s Republic of China, in the sale of goods, supply of labor services in processing, repairing and maintenance (hereinafter referred to as “labor services”), sale of services, intangible assets and immovable properties, and importation of goods are taxpayers of value-added tax (VAT) and shall be subject to VAT in accordance with the Regulations.
Article 2 VAT rates are set as follows:
(1) VAT rate is set at 17 percent for the sale of goods, supply of labor services, leasing services of tangible movable property and importation of goods, unless otherwise stipulated in Subparagraphs (2), (4) and (5) of this Article;
(2) VAT rate is set at 11 percent for the provision of services in transportation, postal service, basic telecommunications, construction and immovable property leasing, the sale of immovable property, the transfer of land use rights, and the sale or importation of the following goods:
1. grain and other agricultural products, edible vegetable oil, and edible salt;
2. tap water, heating, cooled water, hot water, gas, liquefied petroleum gas, natural gas, dimethyl ether, biogas, and coal products for household use;
3. books, newspapers, magazines, audiovisual products, and electronic publications;
4. feeds, fertilizers, pesticides, agricultural machinery, and agricultural films;
5. other goods as prescribed by the State Council.
(3) VAT rate is set at six percent for the sale of services and intangible assets, unless otherwise stipulated in Subparagraphs (1), (2) and (5) of this Article;
(4) VAT rate is set at 0 for the exportation of goods, unless otherwise stipulated by the State Council;
(5) VAT rate is set at 0 for the cross-border sales of services and intangible assets by entities and individuals within China within the scope prescribed by the State Council.
Any tax rate adjustment shall be determined by the State Council.
Article 3 Taxpayers engaging in items subject to different tax rates shall separately calculate the sales amount of such items; where the sales amount is not calculated separately, the higher tax rate shall be applied.
Article 4 Unless otherwise stipulated in Article 11 of the Regulations, for the sale of goods, labor services, services, intangible assets and immovable property (hereinafter collectively referred to as “taxable sales activities”), the amount of VAT payable shall be the balance after deducting the input VAT attributable to the current period from the output VAT attributable to the current period. The formula for calculating the amount of tax payable is as follows:
The VAT payable = output VAT attributable to the current period – input VAT attributable to the current period.
If the amount of output tax attributable to the current period is less than the amount of input tax attributable the current period and thus insufficient for deduction, the shortfall may be carried forward to the following period for deduction.
Article 5 Where taxpayers engage in taxable sales activities, the amount of output VAT shall be calculated and collected as the amount of VAT based on the sales amount and the tax rate specified in Article 2 of the Regulations. The formula for calculating the amount of output VAT is as follows:
The output VAT = sales amount × VAT rate.
Article 6 Sales amount shall be the full price and extra fees charged for the taxable sales activities, excluding the amount of output tax charged.
The sales amount shall be calculated in Chinese yuan. Where the sales amount is settled in a currency other than Chinese yuan, it shall be converted into Chinese yuan.
Article 7 If a taxpayer’s taxable sales activity is obviously underpriced without justifying reasons, the tax authority in charge shall assess and determine its sales amount.
Article 8 Where taxpayers engage in the purchase of goods, labor services, services, intangible assets and immovable property, the amount of VAT paid or borne by them shall be the amount of input tax.
The following amount of input VAT are allowed to be deducted from the amount of output VAT:
(1) the amount of VAT indicated on the Value-Added tax special invoice obtained from the seller;
(2) the amount of VAT indicated on the customs special pay-in warrant for Import VAT obtained from the Customs;
(3) for the purchase of agricultural products where neither the Value-Added tax special invoice nor the customs special pay-in warrant for Import VAT is available, the amount of input VAT shall be calculated based on the purchasing price stated on the produce purchase invoice or the sales invoice at the deduction rate of 11 percent, unless otherwise stipulated by the State Council. The formula for calculating the amount of input VAT is as follows:
The input VAT = purchase price × deduction rate;
(4) for entities or individuals outside China that purchase labor services, services, intangible assets or immovable property located in China, the amount of VAT indicated on the tax payment certificate for taxes withheld, which is obtained from the tax authorities or withholding agents.
Any adjustment to the deductible items or deduction rates shall be determined by the State Council.
Article 9 Where taxpayers purchase goods, labor services, services, intangible assets or immovable property and obtain VAT deduction vouchers that do not conform with the laws, administrative regulations or the relevant regulations of the taxation department of the State Council, the amount of input tax shall not be deducted from the amount of output tax.
Article 10 The amount of input VAT on the following items are not allowed to be deducted from the amount of output VAT:
(1) the purchased goods, labor services, services, intangible assets and immovable property used for taxable items subject to the simplified tax calculation method, VAT- exempt items, collective welfare or personal consumption;
(2) the purchased goods and the related labor services and transportation services subject to abnormal losses;
(3) the purchased goods (excluding fixed assets), labor services and transportation services consumed by products in process and finished products subject to abnormal losses;
(4) other items prescribed by the State Council.
Article 11 Small-scale taxpayers engaging in taxable sales activities are subject to a simplified method for calculating the amount of tax payable based on the sales amount and the collection rate, and the amount of input tax is not allowed to be deducted. The formula for calculating the amount of tax payable is as follows:
VAT payable = sales amount × VAT collection rate.
The standards for small-scale taxpayers shall be specified by the finance department and the taxation department of the State Council.
Article 12 The VAT collection rate for small-scale taxpayers is three percent, unless otherwise stipulated by the State Council.
Article 13 Taxpayers other than small-scale taxpayers shall register with the tax authorities in charge. Specific registration measures shall be formulated by the taxation department of the State Council.
Small-scale taxpayers who have sound accounting practices and can provide accurate tax documents shall, upon registration for not being treated as small-scale taxpayers with the tax authorities in charge, calculate the amount of tax payable in accordance with the relevant provisions of the Regulations.
Article 14 Taxpayers importing goods shall calculate the amount of VAT payable based on the composite assessable price and the tax rates specified in Article 2 of the Regulations. The formulas accounting for the composite assessable price and the tax payable are as follows:
The composite assessable price = customs completion price + customs duty + excise tax;
The VAT payable = composite assessable price × tax rate.
Article 15 The following items are exempt from VAT:
(1) self-produced agricultural products sold by agricultural producers;
(2) contraceptive medicines and devices;
(3) antique books;
(4) imported instruments and equipment directly used in scientific research, scientific experiments and teaching;
(5) imported goods and equipment provided by foreign governments and international organizations as aid given gratis;
(6) goods directly imported by organizations of people with disabilities for exclusive use of disabled people;
(7) self-used articles sold by the seller.
Except as stipulated in the preceding paragraphs, items eligible for VAT exemption and reduction shall be prescribed by the State Council. All regions or departments are not allowed to stipulate such items.
Article 16 Taxpayers operating both VAT-exempt and VAT-reduced items shall separately calculate the sales amount of such items, otherwise no tax exemption or reduction shall be allowed.
Article 17 In cases where the sales amount does not reach the VAT threshold as specified by the finance department and taxation department of the State Council, such taxpayers shall be exempt from VAT. Where that sales amount reaches the VAT threshold, the VAT shall be calculated and paid in full in accordance with the provisions of the Regulations.
Article 18 In cases where an entity or individual outside the territory of the People’s Republic of China supplies labor services within China and has no business establishment in China, its/his/her agent in China shall act as the withholding agent. If it/he/she does not have an agent, the purchaser shall act as the withholding agent.
Article 19 The time when the VAT liability arises shall be as follows:
(1) for taxable sales activities, it shall be the date on which the sales payment is received or the sales receipt is obtained upon request; in cases where the invoice is issued in advance, it shall be the date on which the invoice is issued;
(2) for imported goods, it shall be the date of customs declaration for the import.
The time when the VAT withholding obligation arises shall be the date on which the taxpayer’s VAT liability arises.
Article 20 VAT shall be collected by tax authorities and VAT on imported goods shall be collected by customs.
The VAT on articles for personal use carried or mailed into the territory of China by individuals shall be calculated and collected together with the customs duty. Specific measures shall be formulated by the Customs Tariff Commission of the State Council in conjunction with relevant departments.
Article 21 Taxpayers engaging in taxable sales activities shall issue VAT special invoices to purchasers upon request and indicate the sales amount and the amount of output VAT respectively on the invoice.
VAT special invoices shall not be issued in any of the following cases:
(1) the purchaser in the taxable sales activity is an individual consumer;
(2) the taxable sales activity is subject to tax exemption provisions.
Article 22 The places of VAT payment shall be as follows:
(1) businesses with fixed establishments shall file tax returns with the tax authorities in charge of the places where the establishments are located. Where the head office and branches are not located in the same county (city), they should separately file tax returns and pay taxes to their respective tax authorities in charge. Upon the approval of the finance department and taxation department of the State Council or their authorized financial and tax authorities, the head office may file tax returns and pay taxes on a consolidated basis to the tax authority in charge of the place where the head office is located;
(2) businesses with fixed establishments engaging in supplies of goods or labor services in other counties (or cities) shall report their business activities occurring outside to the tax authorities in charge of the places where their establishments are located, and file their VAT returns with the aforesaid tax authorities. If businesses fail to do so, such businesses shall file VAT returns with the tax authorities in charge of the places where the sales or labor services are supplied. If such businesses fail to file VAT returns with the tax authorities in charge of the places where the sales or the labor services are supplied, the overdue tax shall be collected by the tax authorities in charge of the places where their establishments are located;
(3) businesses without fixed establishments engaging in supplies of goods or labor services in other counties (or cities) shall file their VAT returns with the tax authorities in charge of the places where the sales or labor services are supplied. In cases where such businesses fail to do so, the overdue taxes shall be collected by the tax authorities in charge of the places where their establishments are located or where they reside in;
(4) taxes of imported goods shall be declared and paid to the customs in the places where the customs duties are declared.
The withholding agents shall file tax returns for the withholding taxes with the tax authorities in charge of the places where their establishments are located or where they reside in.
Article 23 The period for VAT payment shall be one day, three days, five days, 10 days, 15 days, a month or a quarter. The specific period for tax payment of a taxpayer shall be assessed and determined by the tax authorities in charge based on the taxpayer’s amount of tax payable; where the VAT cannot be paid periodically, the payment can be made on a transaction-by-transaction basis.
If the period for VAT payment is a month or a quarter, taxpayers shall file tax returns and pay taxes within 15 days from the end of the period. If the period for VAT payment is one day, three days, 10 days or 15 days, taxpayers shall prepay taxes within five days from the end of the period, and file tax returns and settle the amounts of tax payable for the tax period within 15 days from the first day of the next month.
The time limit for withholding agents to pay the taxes withheld shall be in accordance with the above two paragraphs.
Article 24 Taxpayers importing goods shall pay taxes within 15 days from the date on which the customs issue the customs special pay-in warrant for Import VAT.
Article 25 Taxpayers exporting goods subject to the provisions on tax refund (exemption) shall complete the export procedures with the customs, and apply for tax refund (exemption) of the exporting goods to the tax authorities in charge with relevant certificates such as export declaration forms on a monthly basis within the stipulated period of the claim. Entities and individuals within the territory of China supplying services and intangible assets across the border subject to the provisions on tax refund (exemption) shall apply for tax refund (exemption) to the tax authorities in charge within the prescribed time limit. Specific measures shall be formulated by the finance department and taxation department of the State Council.
Where exporting goods are returned or shut out after the completion of tax refund, taxpayers shall pay back the refunded tax in accordance with the law.
Article 26 The collection and administration of VAT shall be carried out in accordance with the Tax Collection and Administration Law of the People’s Republic of China and relevant provisions of the Regulations.
Article 27 Where matters regarding taxpayers’ VAT payment are otherwise stipulated by the State Council or the finance department and the taxation department of the State Council upon approval from the State Council, such regulations shall prevail.
Article 28 The Regulations shall enter into force from January 1, 2009.
Disclaimer: The regulation of company registration in China is translated by FDIChina for reference only. There may be different interpretations of the Chinese version.