Pursuant to Announcement 15, VAT small-scale taxpayers are exempt from VAT if their quarterly sales are equal to or less than 60,000 yuan. For VAT small-scale taxpayers with quarterly sales ranging from 60,000 to 90,000 yuan, VAT is also exempted for the period from 1 October 2014 to 31 December 2015.
In China’s VAT regime, VAT small-scale
taxpayers are to be contrasted with VAT general taxpayers. VAT small-scale
taxpayers are generally subject to VAT at 3% on their sales with neither
deductions of input VAT credits or issuance of VAT invoices allowed. VAT
general taxpayers, on the other hand, are subject to a diverse range of VAT
rates and have neither of the aforementioned restrictions on small-scale
taxpayers regarding VAT credits and invoice issuance. To qualify for VAT
general taxpayers, taxpayers shall meet the standard of either operation scale,
or adequate accounting system.
Announcement 15 also dictates that VAT
small-scale taxpayers in Shenzhen shall lodge their VAT returns on a quarterly
basis. And the above-said exemption is applicable to VAT small taxpayers which also
include both sole proprietors and individuals with temporary tax registrations,
and which file their returns quarterly.
Also, VAT exemptions may also be available
for VAT small-scale taxpayers when they just turn VAT general taxpayers. In the
event that a VAT small-scale taxpayer qualifies for, and is recognized as, a
VAT general taxpayer within a tax filing quarter, VAT shall be exempt for this
tax filing quarter, if in the month preceding to the month when the VAT general
taxpayer status takes effect, the taxpayer is a VAT small-scale taxpayer with
its sales in that preceding month less than or equal to 30,000 yuan.
Besides articulating the requirements for
the VAT exemption, Announcement 15 also touches on the procedural and
administrative issues such as invoice issuance and tax filing. Specifically, it
reiterates that VAT small-scale taxpayers are not allowed to request tax
authorities to issue “VAT special invoices” (which can be used by purchasers/service
recipients to credit against their own VAT liabilities) on their behalf for the
VAT exempted sales or services. Instead, tax authorities can only issue “VAT
ordinary invoices” (which cannot be credited against one’s VAT liabilities) on
VAT small-scale taxpayers’ request and behalf with no prepaid tax imposed
thereon.
[1] 深圳市国家税务局关于增值税小规模纳税人免征增值税有关事项的公告 (http://www.szgs.gov.cn/szgs/tzgg/201410/9be050fea0534b1ab092bb85f6cacd19.shtml)
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