11th June 2019
The Chinese government recently passed VAT reforms for current general VAT payers' sales activities and imports that are subject to VAT an existing applicable rate of 16% to 10%, to the applicable VAT rate adjusted between 13% to 9% respectively from the 1 April 2019. MSI's Chinese accounting member LehmanBrown Ltd provides a summary of the recent VAT reform in China.
It is very important to note that the VAT can only be deducted if the bill is obtained after 1 April 2019. If the taxpayer fails to obtain a proper VAT invoice, its input VAT should be determined for a time according to the provisions below:
Electronic Invoices: In the case that the taxpayer has obtained an electronic VAT invoice, its input VAT should be the tax amount indicated on the invoice.
Air Travel Invoices: In the case that the taxpayer has obtained an E-ticket for air transport with passenger identification information.
– Formula: Input VAT on air passenger transport = (ticket price + fuel surcharge) ÷ (1+9%) × 9%
Rail Travel Invoice: In the case that the taxpayer has obtained a railway ticket with the passenger identification information
– Formula: Input VAT on rail passenger transport = value of the ticket ÷ (1+9%) × 9%
Transit Invoice: In the case that a road, waterway, or other passenger tickets with the passenger identification information is obtained.
– Formula: Input VAT on road, waterway, or other passenger transport = value of the ticket ÷ (1+3%) × 3%
No Identity Information: Some bills will not print passenger identity information, such as some taxi invoices, and passenger quota invoices, according to the policy provisions, these cannot be deducted from VAT.
Welfare Invoices: Business trip tickets especially used for group welfare, personal consumption or entertainment activities and tax-free items shall not be calculated as VAT deduction.
Keep in mind that the above is a brief introduction to the full VAT reform. If you have any questions, please contact LehmanBrown Ltd
LehmanBrown is a China-focused accounting, taxation and business advisory firm, operating dedicated offices in Beijing, Shanghai and Shenzhen with an extensive affiliate network providing service throughout China.
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