National tax administration
Proclamation on the administration of vat exemption for small taxpayers
State tax administration bulletin no. 4 of 2019
According to the circular of the general tax administration of the ministry of finance on the implementation of inclusive tax relief for small microenterprises (2019) in accordance with the provisions of no. 13, a number of regulation issues concerning the exemption of small taxpayers from vat policy for sales of less than $100,000 per month (in this number) are announced as follows:
1. Value-added tax (vat) is exempt from vat for small-scale taxpayers whose combined monthly sales do not exceed $100,000 (in the case of a tax period of one quarter, quarterly sales do not exceed $300,000, the same amount)。
Small taxpayers are exempt from vat for sales of goods, services, services and intangible assets where the total value added tax (vat) taxable sales exceed $100,000 per month, but not more than $100,000 after deducting sales of real property sold in the current period。
Small taxpayers applying the vat differential tax policy determine the entitlement to vat exemption under this bulletin by the amount of the sales after the difference。
The relevant column in the vat tax declaration (small taxpayers application) “full-free sales” fill out the difference。
3. Small taxpayers who pay a fixed period of time may choose one month or a quarter as the duration of the tax, after which no change may be made in a fiscal year。
4. Other individuals referred to in article ix of the rules for the application of the provisional regulations of the people's republic of china on value added tax (vat) are exempt from vat if the rental income derived from the rental of real property in the form of a one-time rental charge is equally apportioned over the corresponding lease period。
5. A general taxpayer whose cumulative sales of less than $5 million for 12 consecutive months prior to the date of the transfer (one month for a tax period) or for four consecutive quarters (one quarter for a tax period) may elect to be transferred to a small taxpayer by 31 december 2019。
Other matters related to the transfer of the general taxpayer to a small taxpayer are implemented in accordance with the relevant provisions of the circular of the state tax administration on certain vat issues, such as the harmonization of the small taxpayer standard (official gazette of the state tax administration, no. 18 of 2018) and the circular of the state tax administration on the harmonization of the small taxpayer standard with respect to export refund (exempt) tax issues (official gazette of the state tax administration, no. 20 of 2018)。
6. Small taxpayers who are required to pay vat in advance under the current provisions are not required to pay an advance tax if the monthly sales at the place of payment do not exceed $100,000. If the tax has been paid prior to the issuance of this bulletin, the tax authority in the place of payment may apply for reimbursement。
7. Units of small-scale taxpayers and individual traders shall determine whether vat is paid in advance in accordance with their tax period, article vi of this bulletin and other existing policy provisions; other private sales of real estate shall continue to be exempt from vat in accordance with the current provisions。
8. If the monthly sales of small-scale taxpayers do not exceed $100,000, the tax paid in respect of the current period as a result of the issuance of a specific vat invoice may be returned to the competent tax authorities upon full joint recovery of the vat invoice or the issuance of the required red-worded invoice。
9. In january 2019, small taxpayers did not sell more than $100,000 (in the case of a tax period of one quarter, the sales did not exceed $300,000 in the first quarter of 2019), but the tax paid in the current period on the basis of the issuance of a normal invoice may be returned to the competent tax authorities when the tax returns are processed。
For small-scale taxpayers whose monthly sales exceed $100,000, the vat invoice management system (vat) is used to issue general vat invoices, uniform motor vehicle sales invoices, and vat electronic generic invoices。
Small taxpayers who already use the vat invoice management system and whose monthly sales do not exceed $100,000 can continue to invoice using existing tax control equipment; those who have issued their own vat-specific invoices can continue to issue their own vat-specific invoices and to pay vat for the calculation of sales of vat-specific invoices。
This proclamation shall be in force since 1 january 2019. Articles iii, paragraph 2, and vi, paragraph 4, of the bulletin of the national tax administration on the regulation of tax collection in connection with the pilot phase of the introduction of the tax on turnover and value-added tax (official gazette no. 23 of 2016), article iii of the bulletin of the national tax administration administration on certain aspects of administration in connection with the clarification of the increase in the pilot camp (official gazette no. 26 of 2016), article ii of the bulletin of the national tax administration administration on certain aspects of administration in connection with the upgrading of the camp (official gazette no. 53 of 2016) and the bulletin of the national tax administration on matters relating to the exemption of small and micro enterprises from value-added tax (official gazette no. 52 of 2017) were repealed。
This announcement is hereby made。
National tax administration
19 january 2019
Interpretation:
Interpretation of the bulletin of the national tax administration on the administration of the policy on exemption of small taxpayers from vat
On 9 january 2019, the standing committee of the state council decided to raise the vat tax exemption rate for small taxpayers from $30,000 to $100,000 per month. In order to ensure the smooth implementation of this preferential policy, the general tax administration has issued circulars clarifying a number of matters of administration. These include:
I. Enforcement quipment on months (quarters)
It is clear that taxpayers calculate sales by combining all vat taxable sales (including sales of goods, services, services, intangible assets and real estate) to determine whether the exemption criteria are met. At the same time, small-scale taxpayers who do not exceed $100,000 after deducting sales of real estate during the current period are entitled to tax exemption for small-scale taxpayers for sales of goods, services, services and intangible assets. Examples are:
Example 1: small-scale a taxpayers sold $40,000 for goods in january 2019, $30,000 for services and $20,000 for real estate. The total sales amounted to $9,000 (=4+3+2) and did not exceed the tax exemption standard of $100,000, so the taxpayer received $90,000 in sales of goods, services and real estate and was entitled to tax exemption for small-scale taxpayers。
Example 2: small-scale a taxpayers sold $40,000 in january 2019 for goods, $30,000 for services and $100,000 for real estate. Total sales amounted to $17,000 (=4+3+10) and sales after the sale of immovable property were eliminated to $7,000 (=4+3); thus, the taxpayer's corresponding sales of goods and services amounted to $70,000 and the small taxpayers ' tax exemption was granted, and the sale of immovable property to $100,000 was taxable by statute。
Application of differential taxation policy
Since the increase in the battalion, some of the differences in the turnover tax policy has been extended. For example, small-scale taxpayers in the construction industry to obtain full price and cost deductions the balance after sub-contracting, excluding external payments, is sales and vat is calculated. The bulletin expressly applied the vat differential tax policy, using the balance of the difference as the sales amount to determine whether it was eligible for tax exemption for small taxpayers. At the same time, the calibre of “tax-free sales” in the vat tax returns of small taxpayers was clarified. For example, in january 2019, a small-scale taxpayer in a construction industry (taxed monthly) received a revenue of $200,000 for construction services and paid a sub-contract to other construction enterprises of $120,000, while the small-scale taxpayer was able to benefit from the small-scale taxpayer tax exemption policy for the same month at a sales rate of $80,000 after deduction of the sub-contract。
Options for the tax period for small taxpayers
Small taxpayers, with different tax periods, may have different effects of tax exemptions. Examples are:
Case 1: sales by a small taxpayer in january-march 2019 were $50,000, $110,000 and $120,000, respectively. If a monthly tax is paid, only $50,000 in january will be taxed; if a quarterly tax is paid, all $280,000 will be taxed, since the quarterly sales are $280,000 and do not exceed the tax exemption criteria. In such cases, small taxpayers prefer to pay quarterly taxes。
Case 2: the sales of a small taxpayer in january-march 2019 were $80,000, $110,000 and $120,000, respectively. If taxed on a monthly basis, $80,000 in january would be taxed, and if taxed on a quarterly basis, 310,000 would not be taxed, since the quarterly sales exceeded the tax exemption criteria. In such cases, small taxpayers prefer monthly taxes。
On the basis of the above, and in order to ensure that the policy is fully enjoyed by small taxpayers, it is made clear that small taxpayers who pay within a fixed period of time may choose to pay monthly or quarterly taxes according to their actual business situation. In order to ensure the relative stability of the taxpayer's tax period during the year, it was also made clear that, once chosen, no change could be made in a fiscal year。
Iv. Application of policies to other individual relevant resources
In 2016, the general tax administration issued proclamation no. 23 and proclamation no. 53, whereby other individuals referred to in article 9 of the rules for the application of the provisional regulations of the people's republic of china on value added tax are entitled to tax exemption for small taxpayers on the basis of a one-time rental charge (including pre-receipt payments) for rental income derived from real estate, which may be divided equally over the corresponding lease period, if the monthly rental income does not exceed $30,000. In order to ensure that taxpayers have full access to the policy, the policy continues after an upward adjustment of the tax exemption standard to $100,000。
V. General taxpayer transfer registration
In 2018, when the small-scale taxpayer standard was harmonized to $5 million, the general taxpayer who had previously been identified (registered) according to the lower standard was allowed to voluntarily choose to be registered as a small-scale taxpayer by the end of 2018. This time, the vat exemption was raised to $100,000, equivalent to 1. 2 million yuan per year for small taxpayers. In such a case, there may be claims by ordinary taxpayers to be transferred to a small taxpayer for tax exemption. In order to ensure that taxpayers fully enjoy the tax relief policy, the bulletin makes it clear that general taxpayers who sell less than $5 million a year may choose to be registered as small taxpayers in 2019 and may benefit from the tax exemption policy after registration. It is to be noted that the taxpayers who had opted for the transfer register in 2018 could still opt for the transfer registration in 2019; however, when the transfer was selected in 2019 and re-registered as a general taxpayer, it could not be re-registered as a small taxpayer。
Vi. Application of the vat-tribution policy
The current vat imposes a number of tax advance measures, such as cross-regional provision of construction services, sale of real estate, rental of real estate, etc. Taking into account the increase in the tax exemption standard from $30,000 to $100,000, and the significant increase in the extent to which taxpayers have benefited from their policies, the bulletin makes it clear that small taxpayers who are required to pay vat taxes in advance under the current regulations are not required to pay taxes in the current period if the monthly sales at the place of payment do not exceed $100,000. Any person who has paid an advance tax prior to the issuance of this bulletin may apply to the competent tax authority of the place of payment。
Vii. Application of policies on sale of immovable property
The sale of immovable property by units of small-scale taxpayers and individual traders involves the matter of the taxpayer's advance payment of taxes at the place where the real estate is located. The vat exemption rate has been raised to $100,000, in the case of sales of real estate amounting to $200,000: in the first case, if a business household chooses to be taxed monthly, the sales of real estate exceed the monthly sales exemption rate of $100,000, the tax is still paid in advance at the place where the real estate is located; and in the second case, if the self-employed person chooses to be taxed quarterly, the sales of real estate does not exceed the quarterly sales exemption rate of $300,000. Accordingly, the bulletin specifies that units and individual traders in small-scale taxpayers who sell real estate shall determine whether they pay vat in advance in accordance with their tax period, article vi of the bulletin and other existing policy provisions。
Other individuals who occasionally sell immovable property should be subject to secondary taxation in accordance with the current policy. Accordingly, the bulletin clearly defines other personal sales of immovable property and continues to be exempted from vat under the current policy. For example, tax exemption may continue to be granted if other individuals have been eligible for tax exemption after two years of sales; if they do not meet the tax exemption conditions, they shall be taxed as required。
Viii. Processing of taxes paid and special invoices issued
Under the current policy, taxpayers who issue or apply for a vat-specific invoice on their own behalf are subject to vat for the calculation of the taxable conduct corresponding to their vat-specific invoice. The bulletin makes it clear that if the monthly sales of small taxpayers do not exceed $100,000, the tax paid in the current period as a result of the issuance of the vat-specific invoice may be returned to the competent tax authorities after all vat-specific invoices have been recovered jointly or the required red-word-specific invoice has been issued。
The retroactive application of tax-related matters in january 2019 (quarterly)
In view of the fact that the tax-exempt documents were issued later than the commencement of the tax-exempt policy (1 january 2019), and in order to ensure that small taxpayers enjoyed full tax-exempt coverage of $100,000, the proclamation clarified the retroactive treatment of tax paid by small taxpayers for the first tax period in 2019, i. E., if the small taxpayers had not sold more than $100,000 in january 2019 (not more than $300,000 in the first quarter of the year), they could apply to the competent tax authorities for refund of the tax due to the issuance of regular invoices on their behalf。
X. Invoice issues
In order to facilitate the issuance of invoices by taxpayers, small taxpayers who have already issued invoices using the vat invoice management system may continue to do so using existing tax control equipment if, after adjustments to tax exemption standards, the monthly sales do not exceed $100,000. If small taxpayers have issued specific vat invoices on their own, they may likewise continue to do so using existing tax control equipment. In addition to the above-mentioned situation and the synchronized adjustment of sales standards, other matters in which small taxpayers themselves issue vat-specific invoices are carried out in accordance with the existing provisions。
