Oct 2022 - Tax preferential policies summary - VAT small taxpayers
We summarize them and other tax preferential policies that may apply to VAT small taxpayers below.
Tax / Fee | Policy | Valid until | How to enjoy | Points of attention |
Value-Added Tax (VAT)
| VAT exemption if monthly sales ≤ 150k (or quarterly ≤ 450k) | 31 December 2022 | Automatic | ž VAT special invoice cannot be issued on exempted income |
VAT exemption for the sales with levy rate at 3% | 31 December 2022 | Automatic | ž VAT special invoice cannot be issued on exempted income ž VAT cannot be exempted for the sales with levy rate at 2% and 5% | |
“Six taxes, Two fees” | 50% cost reduction | 31 December 2024 | Automatic | ž For VAT small taxpayers and small and micro enterprises |
Cultural undertaking development fee | Exemption if monthly sales ≤ 20k (or quarterly ≤ 60k) | No date | Automatic | ž Applicable to taxpayers rendering advertising services |
VAT Small Taxpayers
- Companies are born as small taxpayers
- VAT payable = levy rate × total turnover
- VAT input is not deductible
- Can issue deductible VAT invoices to clients (provided client is a general taxpayer), but VAT input (for the customer) will only be deductible at 3%
Point of attention
- VAT small taxpayer can apply and switch to VAT general taxpayer even if sales do not exceed RMB 5M
- If sales exceed RMB 5M for 12 consecutive months, the company will have to switch to general taxpayer status
Should you have questions regarding the potential impact of these measures on you, please reach out to your usual point of contact at Mazars.
References:
- Ministry of Finance and State Administration of Taxation, [2021] No.11: Notice on clarifying VAT Exemption Policies for VAT Small-scale Taxpayers (link here in Chinese);
- Ministry of Finance and State Administration of Taxation, [2022] No.15: Notice on the exemption of VAT for Small-Scale Taxpayers (link here in Chinese);
- Ministry of Finance and State Administration of Taxation, [2022] No.10: Notice on further implementing the policy of “ Six taxes and Two fees” for small and micro-sized enterprises (link here in Chinese);
- Ministry of Finance and State Administration of Taxation, [2016] No.25: Notice on Issues Relating to Cultural Undertaking Development Fee Policies and Administration of Levying and Collection Relating to Levying VAT in place of Business Tax (link here in Chinese).
