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CAI FA ZI [38]1993.12.25
Article 1 These Detailed Rules were formulated according
to the provisions of Article 28 of "Provisional Regulations
of the People's Republic of China on Value-Added Tax" (hereinafter
referred to as 'these Regulations).
Article 2 "Goods" in Article 1 of these Regulations
refers to tangible moveable goods, including electricity, heat and
gas.
"Processing" in Article 1 of these Regulations refers
to the business of contracting to process goods, where the contractor
supplies the raw materials and major materials and the sub-contractor
manufactures the goods in accordance with the requirements of the
contractor and receives a processing fee.
"Repairs and replacements" in Article1 of these Regulation
refers to the business of contracting to carry out repairs _ damaged
or malfunctioning goods, so as to restore them t< their original
condition and functions.
Article 3 "Sales of goods" in Article 1 of the
Regulation! refers to the transfer of ownership of goods for any
compensation.
"Provision of processing, repairs and replacement services"
in Article 1 of the Regulations refers to the provision of processing,
repairs and replacement services for any compensation. However the
provision of processing, repairs and replacement services by the
staff employed by the units or individual business operators for
their units or employers shall not be included.
" Compensation" in these Detailed Rules includes money,
goods or any economic benefit obtained from the purchaser.
Article 4 The following activities of units or individual
operators shall be deemed as sales of goods:
A. consignment of goods to others for sale;
B. sale of goods on consignment;
C. transfer of goods from one establishment to other establishments
for sale by a taxpayer that maintains two or more establishments
and adopts consolidated accounting, unless the relevant establishments
are maintained in the same county city);
D. application of self-produced or processed goods to produce nontaxable
items;
E. provision of self-produced, processed or purchased goods to
other units or individual operators;
F. distribution of self-produced, processed or purchased goods
to shareholders or investors;
G. use of self-produced or processed goods for collective welfare
or personal consumption;
H. giving out self-produced, processed or purchased goods to others
as free gifts.
Article 5 A sales activity that involves goods and non-taxable
services is a mixed sales activity. Mixed sales activities of enterprises,
enterprise units or individual business operators engaged in production,
wholesaling or retailing of goods shall be regarded as sales of
goods which shall be subject to VAT. Mixed sales activities of other
units or individuals shall be regarded as sales of non-taxable services
which shall not be subject to VAT.
Whether or not a taxpayer's sales activity is a mixed sales activity
shall be determined by the taxation authorities under the State
Administration of Taxation.
"Non-taxable services" as mentioned in the first paragraph
of this Article refers to the services subject to Business Tax within
the scope of the taxable items under communications and transportation,
construction, finance and insurance, post and telecommunications,
culture and sports, entertainment, and service industries.
"Enterprises, enterprise units or individual business operators
engaged in production, wholesaling or retailing of goods" in
the first paragraph of this Article includes enterprises, enterprise
units, and individual business operators principally engaged in
the production, wholesaling or retailing of goods and also engaged
in non-taxable services.
Article 6 Taxpayers also engaged in non-taxable services
shall account separately for the sales amount of goods and tax-
able services and non-taxable services. Without separate accounting
or where accurate accounting cannot be made, the non-taxable services
and goods and taxable services shall together be subject to VAT.
Whether or not the non-taxable services a taxpayer also provides
should pay VAT shall be determined by the tax collection authorities
under the State Administration of Taxation. .
Article 7 "Sales of goods within the borders of the
People's Republic of China" (hereinafter referred to as "within
the borders" ) as mentioned in Article 1 of the Regulations
means the place of dispatch or the location of the goods sold is
within the borders.
"Sales of taxable services within the borders" in Article
1 of the Regulations refers to the sale of taxable services that
takes place within the borders.
Article 8 "Units" in Article 1 of the Regulations,
refers to State-owned enterprises, collectively-owned enterprises,
privately-owned enterprises, joint-stock enterprises, other enterprises,
administrative units, institutions, military units, social organizations
and other units.
"Individuals" in Article 1 of the Regulations, refers
to individual operators and other individuals.
Article 9 Where enterprises lease or contract management
to others, the lessees or the sub-contractors shall be the payers.
Article 10 Where taxpayers selling goods or taxable services
with different tax rates also provide non-taxable services subject
to VAT, the highest of the tax rates on goods or taxable services
shall apply to the non- taxable services.
Article 11 For taxpayers other than small - scale taxpayers
(hereinafter referred to as "general taxpayers"), the
VAT refundable to purchasers due to returns inward or discounts
allowed shall be deducted-from the output tax for the period in
which the returns inward or discounts allowed takes place. The VAX
recovered due to the returns outward or discounts received shall
be: deducted from the input tax for the period in which the returns
outward or discounts received takes place.
Article 12 "Other charges" in Article. 6 of the
Regulations refers; to handling fees, subsidies, funds, fund raising
fees, profits shared, incentive bonuses, damages for breach of contract
(interest on deferred payments), packaging charges, rentals on packaging
materials, contingency charges, quality charges, freight and loading
and unloading charges, commission fees, commissioned disbursement
and charges of any other nature which are in addition to the price
charged to the purchaser. The following items nevertheless shall
not be included:
A. the output VAT collected from purchasers;
B. the Consumption Tax withheld on processing of consumer goods
subject to Consumption Tax;
C. commissioned disbursement of freight charges that satisfies
both the following conditions:
a. a freight invoice from the transportation department was is
sued to the purchaser;
b. the same invoice is turned over by the taxpayer to the purchaser.
All other charges, regardless of the treatment under the accounting
system adopted, shall be included in the sales amount in calculating
tax payable.
Article 13: Where the taxpayer is engaged in mixed sales
activities and non-taxable services that are subject to VAT in accordance
with Article 5 and Article 6 of these Detailed Rules, his sales
amount shall be, respectively, the sum of his sales amounts of goods
and non-taxable services, and the sum of the sales amounts of goods
or taxable services and the non-taxable services.
Article 14: For general taxpayers selling goods or taxable
services that adopt the pricing method of combining the sales amount
and the output tax, the sales amount shall be calculated according
to the following formula:
Sales amount = Sales amount including tax / ( 1 + Tax rate)
Article 15 Pursuant to the stipulations of Article 6 of
the Regulations, if a taxpayer settles the sales amount in foreign
exchange, the Renminbi conversion rate for the sales amount can
be the foreign exchange rate quoted by the State (the median rate
in principle) prevailing on that date or on the first day of the
month in which the sales take place. Taxpayers shall determine in
advance the conversion rate to be adopted but once determined, it
cannot be changed for one year.
Article 16 For taxpayers whose prices are obviously low
and without proper justification as mentioned in Article 7 of the
Regulations, or who sell goods as listed in Article 4 of these Detailed
Rules but without invoiced sales amounts, the sales amount shall
be determined according to the following sequence of procedures
:
A. determined according to the average selling price of the taxpayer
on the same goods in the same month;
B. determined according to the average selling price of the taxpayer
for the same goods in the most recent period.
C. determined according to the composite assessable value. The
formula of the composite assessable value shall be:
Composite Assessable Value = Cost กม (1+Costplus margin rate)
For goods subject to Consumption Tax, the composite assessable
value shall include Consumption Tax payable.
"Cost" in the formula refers to the actual cost of products
sold for sales of self- produced goods; and the actual cost of purchases
for sales of purchased goods. The rate for cost plus margin in the
formula shall be determined by the State Administration of Taxation.
Article 17 "Purchase price" in Paragraph 3, Article
8 of the Regulations includes the price paid by taxpayers to agricultural
producers for purchasing tax-exempt agricultural products and the
Agricultural Special Product Tax withheld according to the regulations.
The "price paid" in the preceding paragraph refers to
the price specified on the purchasing voucher approved for use by
the responsible taxation authorities.
Article 18 For mixed sales activities and non-taxable services
which are subject to VAT according to the stipulations of Article
5 and Article 6 of these Detailed Rules, the input tax on goods
purchased for use in the non-taxable services involved in the mixed
sales activities or in the non-taxable services that satisfies the
stipulations of Articles 8 of the Regulations , may be deducted
from the output tax.
Article 19 "Fixed assets" in Article 10 of the
Regulations refers to:
A. machinery, mechanical apparatus, means of transport, and other
equipment, tools and apparatus related to production or business
operations with a useful life of more than one year;
B. Articles that are not the main equipment for production business
operations but with a unit value of more than 2000 yuan and a useful
life of more than two years.
Article 20 "Non-taxable items" as mentioned in
Article 10 of the Regulations refers to the provision of non-taxable
services, the transfer of intangible assets, the sales of immovable
property and fixed assets under construction, etc..
Article 21 " Abnormal losses" in Article 10 of
the Regulation refer to losses other than the normal wear and tear
in the course of production or business operations. They include:
A. losses due to natural disasters;
B. losses due to theft, spoilage or deterioration, etc., resulting
from improper management;
C. other abnormal losses.
Article 22 Where input tax has already been claimed on goods
or taxable services purchased under the circumstances listed in
Paragraphs (2) to (6) in Article 10 of the Regulations, the in put
tax on these purchases shall be deducted from the output tax for
that period; If the input tax cannot be determined accurately, the
input tax to be deducted shall be calculated based on the actual
costs of that period'.
Article 23 For taxpayers engaged in tax -exempt items or
non-taxable items (not including fixed assets under construction)
and where the input tax cannot be determined accurately, the non-deductible
input tax shall be calculated according to the following formula:
Non-deductible input tax = Total input tax for the month _ Sum
of the sales amounts of tax-exempt items
And turnover of non-taxable items for the month
Sum of the total sales amount and turnover for the month
Article 24 The standards for small-scale taxpayers as mentioned
in Article 11 of the Regulations are as follows:
A. taxpayers engaged in the production of goods or the provision
of taxable services, and taxpayers engaged principally in the production
of goods or provision of taxable services but also in wholesaling
or retailing of goods, the annual sales amount of which is subject
to VAT (hereinafter referred to as "taxable sales amount")
is below 1 million yuan;
B. taxpayers engaged in wholesaling or retailing of goods, the
annual taxable sales amount of which is below 1.8 million yuan.
Regardless whether or not the annual taxable sales amounts exceed
the standards for small-scale taxpayers, all individuals, non-enterprise
units, and enterprises which do not often have taxable activities,
are charged as small-scale taxpayers.
Article 25 The sales amount of small-scale taxpayers does
not include tax payable.
For small-scale taxpayers selling goods or providing taxable services
who adopt the method of setting prices by combining the sales amount
and the tax payable, the sales amount is computed according to the
following formula:
Sales amount = Sales amount including tax / (1 + Assessable rate)
Article 26 For small-scale taxpayers, the sales amount refundable
to purchasers due to returns inward or discount allowed shall be
deducted from the sales amount for the period in which the returns
inward or discount allowed take place.
Article 27 "Sound accounting" as Stated in Article
14 of the Regulations refers to the ability to accurately account
for output tax , input tax and tax payable in accordance with accounting
regulations and the requirements of the taxation authorities.
Article 28 Individual operators who satisfy the conditions
as prescribed in Article 14 of the Regulations and have the approval
of the bureaus directly under the State Administration of Taxation
may be confirmed as general taxpayers.
Article 29 Once small-scale taxpayers have been confirmed
as general taxpayers, they cannot be reclassified as small-scale
taxpayers.
Article 30 General taxpayers in any of the following circumstances
shall calculate the tax payable based on the sales amount and according
to the VAT rates, but no input tax can be deducted and VAT Special
Invoices shall not be issued.
A. the accounting system is unsound or cannot provide accurate
tax information;
B. the conditions of a general taxpayer are satisfied but the taxpayer
has not applied for or carried out the confirmation procedures as
a general taxpayer.
Article 31 The scope of those tax-exempt items listed in
Article 16 of the Regulations are prescribed as follows:
A. "agricultural" as mentioned in Item (1) of Paragraph
(1) refers to the planting, breeding, forestry, animal husbandry
and aquatic products industries;
" agricultural producers'' includes units and individuals engaged
in agricultural production;
" agricultural products" refers to primary agricultural
products; the detailed scope of this definition shall be determined
by the taxation bureaus directly under the State Administration
of Taxation;
B. "antique books" as mentioned in Items (3) of Paragraph
(1) refers to ancient books and old books purchased from the public;
C. "Articles" as mentioned in Item (8) of Paragraph (1)
refers to goods other than yachts, motorcycles, and motor vehicles
that are subject to Consumption Tax.
"Articles which have been used" refers to goods that
have been used by "other individuals" as mentioned in
Article 8 of these Detailed Rules.
Article 32 The scope of application of " VAT minimum
threshold" as mentioned in Article 18 of the Regulations is
limited to individuals.
The range of the VAT minimum threshold is stipulated as follows
:
A. the minimum threshold for sales of goods shall be a monthly
sales amount of 600 to 2000 yuan;
B. the minimum threshold for sales of taxable services shall be
a monthly sales amount of 200 to 800 yuan;
C. the minimum threshold for assessment on a transaction-by-transaction
basis shall be the sales amount per transaction (or per day) of
50 to 80 yuan.
"Sales amount" as mentioned in the preceding paragraph
refers to the "Sales amount of small -scale taxpayers"
as mentioned in the first paragraph of Article 25 of these Detailed
Rules.
The bureaus directly under the State Administration of Taxation
shall determine the minimum threshold locally applicable in the
prescribed range and in accordance with the actual conditions, and
shall report these amounts to the State Administration of Taxation
for their records.
Article 33 The time at which tax liability arises on the
sales of goods or taxable services as prescribed in Item (1), Article
19 of the Regulations is specified according to the different methods
of settlement as follows:
A. for sales of goods under the direct payment method, it shall
be the date on which the sales sum is received or the documented
evidence of the right to collect the sales sum is obtained, and
the bills of lading are delivered to the purchasers, regardless
whether the goods are delivered;
B. for sales of goods where the sales amount is entrusted for collection,
including where entrusted to banks for collection, it shall be the
date on which the goods are delivered and the procedures for entrusted
collection are completed;
C. for sales of goods on credit or receipt by installments, it
shall be the date of collection agreed to in the contracts;
D. for sales of goods with payment received in advance, it shall
the date on which the goods are delivered;
E. for sales of goods on consignment to other taxpayers, it shall
be the date on which the detailed account of consignment sales are
received from the consignee;
F. for sales of taxable services, it shall be the date on which
the services are provided and the sales sum is received or the documented
evidence of the right to collect the sales sum is obtained;
G. for taxpayers that have deemed sales of goods as listed from
Item (3) to Item (8) in Article 4 of these Detailed Rules, it shall
be the date on which the goods are transferred.
Article 34 For overseas units or individuals selling taxable
services within the territory but have not set up any business establishment
within the territory, their agents shall be the withholding agents
for their tax payable. If there are no a-gents, the purchaser shall
be the withholding agent.
Article 35 For businesses without a fixed base, selling
goods or taxable services in a different county (or city) and who
have not reported and paid tax with the responsible taxation authorities
where the sales take place, the responsible taxation authorities
of the location where establishments are located or where the individual
resides shall collect the overdue tax.
Article 36 "Taxation authorities" in Article 20
of these Regulations refers to the State Administration of Taxation,
and the collection authorities under their jurisdiction.
"Responsible taxation authorities" and "collecting
authorities" in the Regulations and these Detailed Rules refer
to branch offices under the State Administration of Taxation at
county level and above.
Article 37 "Above" and "below" in these
Detailed Rules also include the figure or the level itself.
Article 38 These Detailed Rules shall be interpreted by
the Ministry of Finance or by the State Administration of Taxation.
Article 39 These Detailed Rules shall be implemented on
the date the Regulations come into effect. The "Detailed Rules
and Regulations for the Implementation of the Draft Regulations
of the People's Republic of China on Value-Added Tax" and the;
"Detailed Rules and Regulations for the Implementation of the
Draft Regulations of the People's Republic of China on Product Tax"
, promulgated by the Ministry or Finance on September 28, 1984,
shall be annulled on the same date.
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