Tax-payers of VAT and Tax Rates

In PRC, sale of goods or provision of processing, repairing and replacement services and the importation of goods, such kind of units and individuals are value added tax (“VAT”) tax-payer and they shall, in accordance with the  “Provisional Regulations of the People's Republic of China on Value-Added Tax” to pay VAT.

Firstly, the VAT rate:

(1) A taxpayer who is selling or importing goods, except those under paragraph 2 and paragraph 3, the tax rate is 17%.
(2) For taxpayers who are selling or importing the following goods, the tax rate is 13% :
          (1) grain, edible vegetable oil ;
          (2) tap water, heating, air conditioning , hot water, gas, liquefied petroleum gas, natural gas, biogas, coal products for household use;
          (3) books, newspapers and magazines ;
          (4) feed, fertilizers, pesticides, farm machinery, plastic sheeting ;
          (5) State Council and other goods .
(3) Tax-payers who export goods, the tax rate is 0%; however, the State Council states that, unless otherwise provided.
(4) Taxpayers who are providing processing, repairing and replacement services (referred to as: taxable services), the tax rate is 17%.

Note: The tax rate adjustment is based on the State Council decision.

Secondly, the special provisions for VAT payers: the units or individuals outside the PRC are subject to tax for the services provided in the territory. If it does not have operating agency in the territory, within the territory, the tax is payable by the withholding agents; if there is no agent in the territory, the purchase shall be withholding.

Thirdly, the "Provisional Regulations of the People's Republic of China on Value-Added Tax" states: the Sales amount is the one which tax-payers obtain from selling goods and is taxable for services charged by the purchaser for full price and other charges, but it does not include the output tax. For Other charges including the price of outgoing acquirer handling fees, subsidies, funds, collection charges, the return of profits, incentive fees, liquidated damages, late fees, interest on deferred payments, compensation payments, collecting payments, advance payments, packing charges, packaging rent, reserve costs, quality costs, transportation handling fees and other various properties for the price charged.

However, the following items are not included :
1.  For Contracted processing consumer goods are charged for consumption tax consumption that it withheld ;
2. At the same time, if it meet the following conditions, the disbursement transportation costs :
   ( A ) the cost of shipping carrier shall invoice to the purchaser ;
   ( B ) the tax-payer will be transferred to the purchaser 's invoice .
3.  At the same time, if it meets any one of the following conditions, it collects, on behalf of government, the funds or administrative fees:

  • 1. the State Council or the Ministry of Finance which approves the establishment of government funds by the State Council or provincial government and its financial department which approves such kind of administrative fees;
  • 2. a receipt issued and the financial instruments printed by the provincial finance department;
  • 3. Hand over the full amount received to the finance department. 


4.  While sales, the insurance agents the premium charged to the purchaser, and charged to the purchasers'. The vehicle purchased tax, vehicle license fees.

Fourth, in order to implement the State Council which support for small and micro-enterprises to develop, the Ministry of Finance, State Administration of Taxation decided to modify part of the terms of "Provisional Regulations of the PRC VAT" and "Provisional Regulations of the PRC business tax". This decision came into effect on 1 November 2011.

1.  The "PRC VAT Tentative Regulations", Article 37, second paragraph is revised as follows: VAT threshold range is as follows:
   ( 1 ) the sale of goods for the monthly sales RMB 5000-20000 ;
   ( 2 ) sales of taxable services for the monthly sales RMB 5000-20000 ;
   ( 3 ) the amount of tax paid each time for daily sales of RMB 300-500.
2.  The "Provisional Regulations of the PRC Business Tax" Article 103, paragraph 3 is amended as: business tax threshold range is as follows:
   ( A ) the tax schedule for the monthly turnover of RMB 5000-20000 ;
   ( B ) the amount of tax paid each time for daily sales of RMB 300-500 million.

Fifth, the "Provisional Regulations of the PRC Urban Maintenance and Construction Tax" states: Customs VAT which levied on imported goods does not levy on urban maintenance and construction tax.