VAT – Allowable Tax-deductible items

For ordinary tax-payers who sale goods or provide taxable services (referred to selling goods or taxable services), the taxable amount is the current output tax deducts the Input tax balance thereafter.   Formula used for computing the tax payable:-

Tax payable = Output tax - Input tax

“Provisional Regulations of the People's Republic of China on Value-Added Tax”, State Administration of Taxation Order No. 22, it states that tax-payers who purchasing goods or receiving taxable services (hereinafter referred to as purchasing goods or taxable services) are subject to VAT and should borne input tax.

The following taxes inputs are allowed for deduction from the output tax:-

  • 1. those special invoices obtained from the sellers which states VAT.
  • 2. those obtained from the customs for payment of customs import VAT and it indicated the VAT thereon.
  • 3. purchase of agricultural products, in addition to obtaining a VAT invoice or customs, import VAT payment book base on the purchase price of agricultural products invoice or sales invoice of the agricultural products, a 13% deduction rate of VAT. VAT calculation formula:
  • 4. Input tax deduction rate = Actual Price × Deductable Rate
  • 5. purchase or sale of goods during the production process as well as payment of transportation costs according to the settlement documents indicated on the transportation costs. Transportation costs and 7% of the amount calculated by deducting input tax rate . VAT formula:
  • 6. Input tax = Net Rate of Transport Costs amount × Deductable Rate


    Disallowed items and the deduction rate adjustment are determined by the State Council.