Details about the Latest VAT Exemption for Small Taxpayers- 大数跨境

Details about the Latest VAT Exemption for Small Taxpayers

HACOS瀚客企服

2022-03-25

导读：The government on March 24 issued an announcement on the exemption of value-added tax on its officia

Great news! From April 1, 2022 to December 31, 2022, small taxpayers are exempted from VAT on general invoices levied at a rate of 3%! It is available for enterprises even with quarterly sales over 450,000 yuan! But it is noting that VAT special invoices do not enjoy tax-free treatment, and normal tax payment is required.

In bid to further support the development of small and micro enterprises, the government on March 24 issued an announcement on the exemption of value-added tax on its official website.

The announcement mentioned that from April 1, 2022 to December 31, 2022, taxable sales income of small taxpayers that subject to a 3% levy rate is exempted from VAT. Pre-paid VAT items that are subject to a 3% pre-collection rate, will be suspended to pay in advance.

In addition, the preferential tax policies stipulated in Article 1 of the "Announcement of the Ministry of Finance and the State Administration of Taxation on Continuing the Implementation of Some Preferential Tax and Fee Policies in Response to the Epidemic" (Announcement of the Ministry of Finance and the State Taxation Administration [2021 No. 7]) have been extended to March 31, 2022.

Later the same day, the State Taxation Administration released a detailed interpretation of the announcement, answering some frequently asked questions.

Are all the taxable sales income levied at a 3% rate of small taxpayers exempted from VAT?

Whether taxable sales income is eligible for tax exemption depends on when the tax liability occurs. If the tax liability of taxable sales income levied at a 3% rate occurs from April 1 to December 31, 2022, the tax exemption policy can be applied. If the tax liability occurs before March 31, 2022, it shall be taxed in accordance with the previous relevant policies.

How should a small-scale taxpayer issue an invoice and enjoy the tax exemption after obtaining the taxable sales income levied at a 3% rate?

Article 21 of the Interim Regulations of the People's Republic of China on VAT stipulates that if taxpayers have taxable sales that are subject to tax-exemption, they shall not issue special VAT invoices. Accordingly, the announcement clarifies that small taxpayers who obtain taxable sales income levied at a 3% rate, enjoying the tax exemption, may issue general tax-free invoices, but not special VAT invoices.

Can small taxpayers waive tax exemption and issue special VAT invoices? If yes, what is the levy rate?

Small taxpayers have the right waive tax exemption for the taxable sales income levied at a 3% rate and issue special VAT invoices. If the taxpayer chooses to waive tax exemption and issue special VAT invoices for part or all of the taxable sales income, a special VAT invoice with a levy rate of 3% shall be issued.

For those who have issued VAT invoices before the end of March 2022, what should they do in the event of sales allowances, suspensions, refunds, or incorrect invoicing?

The announcement clarifies that small taxpayers who have issued VAT invoices before the end of March 2022 should issue red-letter invoices at the original levy rate in the event of sales allowances, suspension, refunds, or incorrect invoicing. If the taxpayer has made a mistake in invoicing, a correct blue-letter invoice shall be re-issued after issuing the red-letter invoice.

How to fill in the relevant tax exemption columns when filing VAT returns?

Article 3 of this announcement clarifies that if small VAT taxpayers’ total monthly sales do not exceed 150,000 yuan (if a quarter is a tax period, the quarterly sales do not exceed 450,000 yuan), the sales exempted from VAT shall be filled in the "VAT and Additional Tax Returns (Applicable to Small Taxpayers)" or " Sales below the threshold”. If there are no other tax-exempted items, there is no need to fill in the "Detailed Form for VAT Reduction and Exemption Declaration"; if the total monthly sales exceeds 150,000 yuan, the total sales exempted from VAT should be filled in "Other Tax-exempt Sales" and the corresponding column in the "Detailed Form for VAT Reduction and Exemption Declaration".

For taxpayers who have undergone re-registration from 2018 to 2020, their input tax that has not been deducted before the re-registration and the deductible tax in the current period on the date of re-registration have included in the "Taxes Payable - Input Tax to Be Deducted" according to regulations. Is it feasible for them to apply for this part of the input tax to be deducted from the output tax?

The balance included in the "Taxes Payable - Input Tax to Be Deducted" before March 31, 2022 can be included in fixed assets, intangible assets, investment assets, and inventories in 2022. And it will be deducted before corporate income tax or individual income tax according to regulations. For the part of depreciation and amortization that have been deducted before tax will no longer be included. As for the part that cannot be classified, it can be deducted at one time before corporate income tax or individual income tax in 2022.

For those who want to start business, it is better to do it as soon as possible because the preferential policies are limited in time!

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