【Now!China】New rules on value added tax pilot programme

New rules on value added tax pilot programme

China recently announced new tax collection and administrative rules — in effect since 1 May 2017 — relating to its value added tax pilot programme.

Transactions of taxpayers who sell prefabricated houses, equipment and self-made steel structure products and provide construction / installation services are not considered as “mixed sales” — transactions that involve both sales of products and provision of services in general — during calculation of tax liability. Such taxpayers are instead required to calculate the sales volume of their products and services separately, as these are subject to different tax rates.

If a construction enterprise enters into a construction agreement with a contractor before authorising an intra-group entity (or “entity”) to provide the contractor with construction services (through internal authorisation or a tripartite agreement that allows the entity to directly issue the contractor VAT invoices and receive payments from it), the construction enterprise shall not be subject to VAT for the same transaction. The contractor shall claim relevant input VAT rebates based on special VAT invoices issued by actual suppliers of construction services.

A taxpayer providing plant conservation services shall be subject to VAT applying to “other lifestyle services”.

A taxpayer that derived income under the previous business tax regime prior to 1 May 2016 and has yet to issue invoices for such transactions is required to issue normal VATinvoices instead by 31 December 2017 (unless otherwise specified by the State Administration of Taxation).

Special and normal VAT invoices for sales of motor vehicles issued by general VAT taxpayers on or after 1 July 2017 must gain approval for tax deduction through thegovernment’s VAT invoice enquiry website within 360 days from the issuance date. After that, the taxpayer has to claim input VAT credit by the filing deadline.