Interim Value-Added Tax Regulations of the People's Republic of China (Revised in 2017)

Order of the State Council of the People's Republic of China No.691

November 19, 2017

(Published by the Order of the State Council of the People's Republic of China No.134 on December 13, 1993; revised and adopted at the 34th executive meeting of the State Council on November 5, 2008; revised for the first time in accordance with the Decision of the State Council on Revising Certain Administrative Regulations dated February 6, 2016; and revised for the second time in accordance with the Decision of the State Council on Repealing the Interim Regulations of the People's Republic of China on Business Tax and Revising the Interim Value-Added Tax Regulations of the People's Republic of China dated November 19, 2017)

Article 1 Entities and individuals selling goods, providing labor services of processing, repairs or maintenance (hereinafter referred to as the "labor services"), or selling services, intangible assets or real property in China, or importing goods to China, shall be identified as taxpayers of value-added tax, and shall pay value-added tax under the Interim Value-Added Tax Regulations of the People's Republic of China (Revised in 2017).

Article 2 Value-added tax rates:
1. Taxpayers that sell goods, labor services or tangible personal property leasing services or import goods and do not fall within the scope as specified in Item 2, Item 4 and Item 5 of this Article shall be subject to a 17% tax rate.
2. Taxpayers that sell transport services, postal services, basic telecommunications services, construction services, or real property leasing services, sell real property, transfer the land use right, or sell or import the goods listed below shall be subject to an 11% tax rate:
(1) Such agricultural products as grain, edible vegetable oil, and common salt;
(2) Tap water, heat supply, air-conditioning, hot water, gas, liquefied petroleum gas, natural gas, dimethyl ether, methane and civil-use coal products;
(3) Books, newspapers, magazines, audio-visual products, and electronic publications;
(4) Feeds, chemical fertilizers, pesticides, agricultural machineries and mulching films; and
(5) Other goods specified by the State Council.
3. Taxpayers that sell services or intangible assets and do not fall within the scope as specified in Item1, Item 2 and Item 5 of this Article shall be subject to a 6% tax rate.
4. Taxpayers who export goods are subject to a zero tax rate, unless otherwise specified by the State Council.
5. Domestic entities and individuals that sell services or intangible assets under the scope specified by the State Council across borders are subject to a zero tax rate.
Adjustments to the tax rates shall be decided by the State Council.

Article 3 Taxpayers concurrently engaging in trading items that are subject to VAT at different rates shall separately calculate the sales value of such items based on the applicable tax rates. Where the sales values are not calculated separately, the highest tax rate applies.

Article 4 Except in circumstances specified in Article 11 of these Regulations, taxpayers' liability for selling goods, labor services, services, intangible assets, or real property (hereinafter referred to as the "taxable sales activities") shall amount to the balance after deducting input tax from output tax in the current period. The formula for the taxable amount is as follows:
Taxable Amount = Output Tax in the Current Period - Input Tax in the Current Period
Where output tax is less than input tax in the current period, the unutilized input tax may be carried forward to the subsequent period.

Article 5 Output tax is the amount of value-added tax calculated and collected by taxpayers for their taxable sales activities based on multiplication of the sales value by the rates listed in Article 2 of these Regulations. The formula for the calculation of output value-added tax is as follows:
Output Tax = Sales Value x Tax Rate

Article 6 Sales value shall include the full price charged by taxpayers for their taxable sales activities plus additional fees and charges, but shall not include the output value-added tax.
Sales value shall be calculated in Renminbi. Taxpayers who sell goods in currencies other than Renminbi shall convert their sales value into Renminbi.

Article 7 If a taxpayer has any taxable sales activity at a significantly lower price without a good reason, the sales value in question shall be determined by the competent taxation authority.

Article 8 Input tax is the amount of value-added tax payable by the taxpayer that purchases goods, labour services, services, intangible assets, or real property.
Input tax shall be deducted from output tax in the following circumstances:
1. The amount of value-added tax is printed on the value-added tax invoice acquired from the seller.
2. The amount of value-added tax is printed on the paid import value-added tax receipt acquired from Customs.
3. Input tax on purchases of agricultural products is calculated by multiplying the 11% deductible rate by the selling price of the agricultural products in question printed on the purchase invoice or sales invoice for such agricultural products, as supported by related value-added tax invoices or paid import value-added tax receipts from Customs, unless otherwise specified by the State Council. The formula for the calculation of input tax is as follows:
Input Tax = Selling Price x Deductible Rate
4. The amount of value-added tax indicated on the tax payment certificate issued by the tax authority or the party obligated with withholding tax for the tax withheld and remitted on a commission basis, if labor services, services, intangible assets or domestic real property are purchased from overseas entities or individuals.
Adjustments to deductible items and rates shall be determined by the State Council.

Article 9 Input tax on goods, labor services, services, intangible assets, and real property purchased by taxpayers shall not be deducted from output tax if the related documentation for value-added tax rebates does not meet the requirements as stipulated in the relevant laws, regulations or rules of the taxation division of the State Council.

Article 10 Input tax on the following items shall not be deducted from output tax:
1. Goods, labor services, services, intangible assets and real property purchased for items subject to the simplified calculation method, items exempted from value-added tax, or for collective welfare or personal consumption;
2. Goods and related labor services and transport services purchased but then damaged or lost in abnormal circumstances;
3. Products, and other goods (excluding fixed assets), labor services and transport services purchased for processing finished products, lost or damaged in abnormal circumstances; and
4. Other items specified by the State Council.

Article 11 Small-scale taxpayers that have taxable sales activities shall calculate the taxable amount under the simplified method by directly multiplying the sales value by the applicable rate, and the input tax shall not be deductible. The formula for the taxable amount is as follows:
Taxable Amount = Sales Value x Applicable Tax Rate
The criteria for determining small-scale taxpayers shall be provided by the finance and tax division of the State Council.

Article 12 Small-scale taxpayers shall be subject to the 3% value-added tax rate, unless otherwise stipulated by the State Council.

Article 13 Taxpayers other than small-scale taxpayers shall conduct registration with the competent taxation authorities. The procedures for registration shall be determined by the tax division of the State Council.
Small-scale taxpayers who are able to prove their accounting and auditing records and produce accurate taxation information may register with the competent taxation authorities not as small-scale taxpayers, and calculate relevant tax payable as stipulated in these Regulations.

Article 14 Taxpayers who import goods shall calculate their taxable amount by multiplying the gross taxable price by the applicable tax rates provided in Article 2 of these Regulations. The formulae for the gross taxable price and the taxable amount are as follows:
Gross Taxable Price = Price after Customs Duty Consumption Tax
Taxable Amount = Gross Taxable Price x Tax Rate

Article 15 The items listed below shall be exempted from value-added tax:
1. Agricultural products produced and sold by agricultural producers themselves;
2. Prophylactic drugs and devices;
3. Antique books;
4. Imported instruments and equipment to be directly used in scientific research, scientific experiments and teaching;
5. Materials and equipment imported by foreign governments and international organizations for gratis aid;
6. Products exclusively for the disabled directly imported by organizations for the disabled; and
7. Sales of goods used by sellers themselves.
Except for those specified in the above Articles, items subject to exemption and deduction for value-added tax purposes shall be determined by the State Council. No localities or departments may decide exempted or deductible items.

Article 16 Taxpayers who are concurrently trading exempted and deductible items shall separately calculate the sales value of such exempted and deductible items so that sales values not separately calculated shall not be exempted or deductible.

Article 17 Taxpayers whose sales value does not reach the threshold for levying value-added tax as specified by the finance and tax division of the State Council shall be exempted from value-added tax. Those whose sales value has reached the aforesaid threshold shall be bound to calculate and pay value-added tax under these Regulations.

Article 18 For entities or individuals outside China selling labor services in China without an office in China, local agents, or an appointed agent, purchasers shall become the parties to withhold and pay tax on their behalf.

Article 19 Value-added tax liability occurs (tax point):
1. For taxable sales activities, the tax point shall be the date on which the full payment is made or the receipt of the payment is delivered. Should the invoice be issued in advance, the tax point shall be the date on which the invoice is issued.
2. For imported goods, the tax point shall be the date on which the import declaration is lodged.
The tax point for withholding value-added tax shall be the date on which value-added tax liability on taxpayers occurs.

Article 20 Value-added tax shall be levied by the taxation authorities. Value-added tax on imported goods shall be levied by Customs.
Value-added tax on articles carried or posted by individuals to China for personal consumption shall be calculated and levied together with customs duties. The practical rules shall be drafted by the Customs Tariff Commission of the State Council jointly with the departments concerned.

Article 21 When carrying on taxable sales activities, taxpayers shall issue value-added tax special invoices upon the request of buyers, and shall print the sales value and output tax amount on such value-added tax special invoices.
Value-added tax special invoices shall not be issued in the following circumstances:
1. The purchase of taxable sales activities by individual consumers; or
2. The application of VAT exemption rules to taxable sales activities.

Article 22 Localities accepting value-added tax payments are listed as follows:
1. Traders with fixed business addresses shall file tax returns with the competent taxation authorities at the locations of their offices. Headquarters and local offices located in different counties (cities) shall separately file tax returns with the competent local taxation authorities in their localities. Upon approval of the finance and tax division of the State Council or the authorized departments of finance and tax, headquarters may file tax returns with the competent taxation authorities within their localities for themselves and their local offices.
2. Traders with fixed business addresses who sell goods or taxable labor services in other counties (cities) shall report the non-local business concerned to the competent taxation authorities at the locations of their offices, and shall file tax returns in the locations of their offices. Where the non-local business has not been reported, the traders in question shall file tax returns with the competent taxation authorities in the localities where the sales or taxable labor services in question take place. Should taxpayers not file tax returns with the competent taxation authorities in the localities where the sales or taxable labor services in question take place, the competent taxation authorities at the locations of their offices shall pursue the due tax from these taxpayers.
3. Traders without fixed business addresses who sell goods or labor services shall file tax returns with the competent taxation authority in the localities where the sales or taxable labor services in question take place. Should taxpayers not file tax returns with the competent taxation authorities in the localities where the sales or taxable labor services in question take place, they shall pay tax to the competent local taxation authorities at the locations of the traders' offices or domiciles.
4. Tax returns and tax on imported goods shall be filed with and paid to Customs.
Parties who have the obligation of withholding tax shall file tax returns for the withheld tax to the competent tax authorities at the locations of the parties' offices or domiciles.

Article 23 The value-added tax period shall be on the 1st, 3rd, 5th, 10th or 15th day of each month, or on a monthly or quarterly basis. The due date of value-added tax shall be determined by the competent taxation authorities based on the taxable amount. Taxpayers who are unable to pay value-added tax on a periodical basis may pay tax after every single transaction.
Taxpayers whose tax periods are on a monthly or quarterly basis shall file tax returns within 15 days of the end of the tax period. Taxpayers whose tax periods are on the 1st, 3rd, 5th, 10th or 15th day of each month shall pre-pay tax within 5 days of the end of the tax period, and, between the 1st and 15th days of the following month, file tax returns and settle the balance of the taxable amount for the previous month.
The tax periods for parties who are obliged to withhold tax shall be fixed in line with the previous two paragraphs.

Article 24 Taxpayers who import goods shall pay tax within 15 days of Customs sending out the Customs Import Value-Added Tax Payment Notice.

Article 25 Taxpayers who are qualified by the rules governing tax refunds (exemption) for exported goods shall complete the export procedures with Customs, and may apply for the tax refunds (exemption) for the exported goods in question to the competent taxation authorities on a monthly basis by producing the related export declaration documents and other evidence within the filing period as specified in the export tax refund (exemption) rules; domestic entities and individuals that sell services and intangible assets across borders and are eligible for the provisions concerning tax refund (exemption) shall apply to the competent taxation authorities on schedule for the tax to be refunded (exempted). The practical rules shall be drafted by the divisions of finance and tax of the State Council.
If exported goods are returned or withdrawn from Customs, the taxpayers in question shall pay back tax refunds in accordance with the relevant statutory requirements.

Article 26 Value-added tax shall be levied and administered under the Tax Levy and Administration Law of the People's Republic of China and these Regulations.

Article 27 Where there are other provisions concerning matters about value-added tax payments by taxpayers, as separately announced by the State Council or by the competent taxation authority or the competent finance authority under the State Council upon approval of the State Council, such provisions shall prevail.

Article 28 These Regulations shall come into effect as of January 1, 2009.