For a production and processing enterprises, the monthly production has about 7% are below standard and it is quite balanced monthly. Question: whether those turns out partial retirement products, raw materials can be used for input tax, for the scrapped products, what the tax authority need to do in order to identify the tax deduction?
Firstly, treatment of VAT:-
Under the "Provisional Regulations on VAT" Article 10, the following items of input tax shall be deducted from the output tax:-
- 1. For non-VAT taxable items, VAT exceptional items, the collective welfare or personal consumption goods or taxable labor ;
- 2. Abnormal losses related to the purchase of goods are taxable services ;
- 3. Abnormal losses in finished products consumed purchased goods are taxable services ;
- 4. The finance, tax authorities under the tax-payers who pay for its own consumer goods.
Article 24 of the implementation rules, provisions of Article 10 (2), the term non-normal loss is the result of mismanagement, stolen, lost, or rotten loss.
According to the above provisions, under the VAT treatment, the losses arising from defective products are not abnormal losses, is not necessary for input tax to transfer out.
Secondly, corporate income tax treatment:
According to "Enterprise Income Tax Law" Article 8, enterprise’s actual income received and the reasonable expenses, it includes costs, expenses, taxes, losses and other expenses that are allowed in computing taxable income amount. Article 32 of the Implementation Rules, Corporate Income Tax Law Article 8 alleged loss, is an enterprise in production and business activities occurring fixed assets and inventory shortage, damage, obsolescence, transfer property damage, loss doubtful, bad debt loss, natural disasters and other damage caused by force majeure and other losses, the losses incurred by an enterprise, less responsible for compensation and insurance claims, the balance, according to the accounts, the tax authorities to deduct.
Cai Shui [ 2009 ] No. 57 on the loss of corporate assets tax deduction policy notice (A) the notice refers to loss of assets where an enterprise during production and business activities actually occurred, with the acquisition of assets related to taxable income losses, including cash losses, loss of deposit, bad debt losses, loan losses, equity investment losses, fixed assets and inventory shortage, damage, obsolescence, theft losses, natural disasters and other damage caused by force majeure and other losses; Article 13, the various businesses of their net asset losses, loss of assets should be provided to prove the legitimate indeed had actually occurred, evidence, including external evidence legally binding, legally qualified intermediary economic appraisal certificates, professional organization with legal qualifications technical appraisal proof.
According to the relevant provisions of the EIT Law, it a company incurs losses, loss of assets should be provided to prove that indeed, it has actually occurred legitimate evidence, including external evidence legally binding, legally qualified intermediary economic appraisal certificates, with statutory qualifications of professional bodies such as the technical proof of identification when calculating the taxable income amount.