Provisional Rules of the People's Republic of China on Value-added Tax
Adopted 26 November 1993 by the 12th Session of the Standing Committee of the State Council.
Promulgated 13 December 1993 by the State Council.
Article 1 .
All units and individuals who sell goods or provide processing, repair and installation services or who import goods within the People''s Republic of China shall be the obligatory payers of value-added tax (hereinafter referred to as taxpayers) and shall pay value-added tax (VAT) in accordance with the provisions of these Rules.
Article 2 .
VAT rates:
1. Apart from those items specified in items (2) and (3) of this Article, 17% on sales or imports of goods.
2. On sales and imports of the following goods, 13%:
(1) cereals and edible vegetable oils;
(2) tap water, heaters, air conditioning, hot water, coal gas, liquefied petroleum gas, natural gas, biogas and coal products for residential use;
(3) books, newspapers and magazines;
(4) forage, chemical fertiliser, pesticides, farm machinery and plastic film for agricultural purposes;
(5) other goods as prescribed by the State Council.
3. Except where otherwise specified by the State Council, export goods shall attract a zero rate.
4. On the provision of processing, repair and installation services (hereinafter referred to as taxable services) by a taxpayer, 17%.
Adjustment to the VAT rates shall be determined by the State Council.
Article 3 .
A taxpayer who supplies goods or taxable services which are covered by different tax rates shall account for the sales value of those goods and taxable services separately. Where separate accounting has not been performed, the highest VAT rate shall apply.
Article 4 .
Apart from the provisions of Article 13 of these Rules, the VAT payable by a taxpayer on sales of goods and supplies of taxable services (hereinafter referred to as sales of goods or taxable services) shall be the amount remaining after the VAT on goods and services purchased has been deducted from the VAT on sales of goods or taxable services during the same period. The formula for calculation of VAT payable is:
amount of tax payable = sales VAT for the current period - purchases VAT for the current period
Where the sales VAT for the current period is less than the purchases VAT for the same period, the balance may be carried forward to be offset in later periods.
Article 5 .
Sales VAT is the amount of VAT calculated according to the rates provided in Article 2 of these Rules applied to the sales value and is collectable by the taxpayer from the purchaser to whom goods or taxable services have been supplied. The formula for calculation of sales VAT is:
amount of sales VAT = sales value ЈїЈї VAT rate
Article 6 .
Sales value refers to the total cost plus additional fees received by the taxpayer from a purchaser of goods or taxable services, but does not include sales VAT collected.
Sales value shall be calculated in renminbi. Taxpayers who account for sales value in a foreign currency shall use the prevailing rate quoted on the foreign exchange market to convert those amounts into renminbi.
Article 7 .
Where a taxpayer supplies goods or taxable services at prices which are, for no proper reason, clearly low, the sales value shall be determined by the taxation authorities.
Article 8 .
Purchases VAT refers to the VAT payable by a taxpayer on the purchase of goods or on the receipt of taxable services (hereinafter referred to as the purchase of goods or taxable services).
Subject to the provisions of Article 3 of these Rules, the amount of purchases VAT which may be deducted from sales VAT shall be limited to the amount of VAT specified in the following VAT withholding certificates:
(1) the amount of VAT specified in the special VAT invoices obtained from the seller;
(2) the amount of VAT specified on the tax certificates obtained from the Customs.
The amount of purchases VAT deductible on the purchase of tax-free agricultural products shall be calculated at 10% of the actual purchase price. The purchases VAT shall be calculated according to the following formula:
purchases VAT = purchase price ЈїЈї deduction rate
Article 9 .
If a taxpayer tails to obtain and retain a VAT withholding certificate or if the amount of VAT and other related matters are not specified on the VAT withholding certificate in accordance with these Rules, the purchases VAT shall not be deductible from the sales VAT.
Article 10 .
Purchases VAT on the following items shall not be deductible from sales VAT:
(1) purchase of fixed assets;
(2) goods or taxable services for use in non-taxable projects;
(3) goods or taxable services for use in tax-free projects;
(4) goods or taxable services for collective welfare or individual use;
(5) extraordinary losses of purchased goods;
(6) extraordinary losses of goods or taxable services used in the production of merchandise or finished products.
Article 11 .
A simplified method for the calculation of VAT payable shall be adopted by taxpayers engaged in small scale businesses supplying goods or taxable services.
The definition of small scale taxpayers shall be determined by the Ministry of Finance.
Article 12 .
The VAT rate applicable to a small scale taxpayer for the supply of goods or taxable services shall be 6%.
Adjustments to this rate shall be determined by the State Council.
Article 13 .
Small scale taxpayers selling goods or taxable services and paying VAT according to the amount of sales and the VAT rate as specified in Article 12 of these Rules shall not be allowed to deduct purchases VAT. The VAT payable shall be calculated according to the following formula:
VAT payable = sales value ЈїЈї VAT rate
Sales value shall be determined pursuant to the provisions of Article 6 and 7 of these Rules.
Article 14 .
A small scale taxpayer who maintains a sound accounting system and is able to provide accurate accounting records for taxation purposes may, with the approval of the taxation authorities, be regarded as not being a small scale taxpayer and have its VAT payable calculated in accordance with the relevant provisions of these Rules.
Article 15 . The VAT payable on goods imported by taxpayers shall be calculated according to the composite taxable value and the VAT rate as specified in Article 2 of these Rules, with no deductions. VAT payable and composite taxable value shall be calculated according to the following formulae:
composite taxable value = value on which Customs duty was paid + Customs duty + consumption tax
VAT payable = composite taxable value ЈїЈї VAT rate
Article 16 .
The following items shall be exempt from VAT:
(1) agricultural products sold by the agricultural producers themselves;
(2) contraceptive drugs and devices;
(3) antique books;
(4) imported instruments and equipment for use directly in scientific research, experiments and teaching;
(5) materials and equipment imported as aid provided by foreign governments and international organisations;
(6) equipment imported for processing, assembly or compensation trade;
(7) products for use by disabled persons directly imported by disabled person organisations;
(8) sale of articles already used by the seller.
Apart from the provisions of the preceding paragraph, the exemption from and reduction of VAT on other items shall be determined by the State Council. No region or department shall regulate items for reduction of or exemption from VAT.
Article 17 .
Taxpayers dealing in items which are eligible for exemption from or reduction of tax shall account for the sales values of such items separately; where sales values have not been accounted for separately, no reduction or exemption shall be allowed.
Article 18 .
Taxpayers whose sales values are below the taxable threshold as determined by the Ministry of Finance shall be exempt from VAT.
Article 19 .
The liability for payment of VAT shall occur at the following times:
(1) for the supply of goods or taxable services, the date on which the sales value or proof of receipt of the sales value if received;
(2) for imported goods, the date on which Customs declaration is made.
Article 20 .
VAT shall be collected by the taxation authorities, and VAT on imported goods shall be collected by Customs on behalf of the taxation authorities.
VAT on articles carried by individuals into or sent into China for personal use shall be calculated together with customs duties. Detailed implementing rules shall be determined by the Customs Duty Decree Committee of the State Council together with relevant departments.
Article 21 .
A taxpayer supplying goods and taxable services shall issue special VAT invoices to the buyer which clearly separate the sales value and the amount of sales VAT.
In the following cases where the issue of an invoice is required, an ordinary invoice shall be issued and it shall not be permitted to issue a VAT invoice:
(1) sales of goods or taxable services to consumers;
(2) sales of tax-free goods;
(3) sales of goods or taxable services by small scale taxpayers.
Article 22 .
Locations for the payment of VAT:
(1) Businesses with a fixed location shall lodge VAT returns and make payments with the local taxation authorities in their location. Where the head office and branch offices are not located in the same county (or city), they shall lodge separate VAT returns and make payments to the taxation authorities in their locality; subject to approval of the State Administration of Taxation or the tax authorities empowered by the Administration, combined VAT returns and payments may be made by the head office to the local taxation office in its locality.
(2) Businesses with a fixed location which sell goods outside their own county (or city) shall apply to their local tax authorities for certificates of tax collection and management of business activities conducted outside of their localities and shall lodge VAT returns and make payments to their local taxation authorities. Without such certificates, a business which sells goods or taxable services outside of its own county (or city) shall lodge VAT returns and make payments to the local taxation authority in the location of the place of sale, and where no VAT returns and payments have been made to the taxation authorities in the place of sale, supplementary VAT shall be collected by the taxation authority in the location of the business.
(3) A business with no fixed location which sells goods and taxable services shall lodge VAT returns and make payments to the taxation authorities in the places of sale.
(4) VAT returns and payments on imported goods shall be made by the importer or his agent to the Customs authorities at which the imported goods are declared.
Article 23 .
The payment periods for VAT shall be one day, three days, five days, then days, fifteen days or one month. The specific payment period for a taxpayer shall be determined by the taxation authorities according to the amount of VAT payable; if VAT payments cannot be made on a periodic basis, the may be paid on a transaction basis.
A taxpayer with a VAT payment period of one month shall lodge a VAT return and make payment within ten days of the end of each period; a taxpayer with a VAT payment period of one day, three days, five days, ten days or fifteen days shall make a provisional VAT payment within five days of the end of that period and shall, within ten days from the first day of the following month, lodge a VAT return and settle the VAT payable from the previous month.
Article 24 .
Payment of VAT on imported goods shall be made by a taxpayer within seven days of the day following the issue of tax payment certificates by Customs.
Article 25 .
For the export of goods on which the VAT rate is zero a taxpayer may, following the completion of export procedures with the Customs authorities and with the export declaration and other relevant documents, apply to the taxation authorities on a monthly basis for a refund of VAT paid on such goods. Detailed implementing rules shall be determined by the State Administration of Taxation.
If the exported goods are returned by the buyer or the Customs authorities subsequent to the refund of VAT, the taxpayer shall repay the vat refunded in accordance with the law.
Article 26 .
The administration of the levying and collection of VAT shall be carried out in accordance with the "Law of the People''s Republic of China to Administer the Levying and Collection of Taxes" and the relevant provisions of these Rules.
Article 27 .
The collection of VAT from foreign investment enterprises and foreign enterprises shall be conducted in accordance with relevant regulations of the Standing Committee of the National People''s Congress.
Article 28 .
The Ministry of Finance shall be responsible for the interpretation of these Rules, and detailed rules for their implementation shall be formulated by the Ministry of Finance.
Article 29 .
These Rules shall take effect from 1 January 1994. The "Regulations of the People''s Republic of China on Value-added Tax (Draft)" and the "Regulations of the People''s Republic of China on Product Tax (Draft)" promulgated 18 September 1984 by the State Council shall be annulled |
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