China: China Tax Regulation Update: December 2011 And January 2012

Circular Number

Issuance Date

Effective Date

Topic

What is new?

Circular Caishui
[2011] No.110 Circular Caishui
[2011] No.111

2011-11-16

2012-01-01

Pilot VAT reform in Shanghai

Starting from 1 January 2012, certain services ("Taxable Services") provided by taxpayers in Shanghai or provided by foreign enterprises to tax payers in Shanghai are subject to Value Added Tax ("VAT") and not the previous Business Tax. This is generally viewed as a tax-cutting reform due to the Input-Output credit system available in the VAT regime. The reform is expected to be extended to all over China in the future. For more details on this topic, please refer to our recent newsletter titled "China moving forward to expand VAT scope with Shanghai as Pilot Region":

http://www.cms-china.info/insight/2012/01/China- Insight-Corporate.html

SAT Announcement
[2011] No. 65

2011-12-02

2012-01-01

General VAT payer status recognition concerning the pilot VAT reform in Shanghai

According to the Announcement, a tax payer providing Taxable Services as defined in the Circular Caishui [2011] No.111 is required to apply for the general VAT payer status, if its annual turnover of Taxable Services exceeds RMB 5 million. A tax payer with an annual turnover below this threshold can also apply to become a general VAT tax payer if it has a fixed business place and keeps proper accounting records.

Unlike small-scale VAT payers, a general VAT payer is entitled to the Input-Output credit system and can issue VAT invoices.

Circular Caishui
[2011] No. 131

2011-12-29

2012-01-01

Exportation of Taxable Services in the context of the pilot VAT reform in Shanghai

According to the Circular Caishui [2011] No.110, in the pilot VAT reform in Shanghai, exportation of Taxable Services enjoys either a zero VAT rate or VAT exemption. T

he Circular clarifies that for exportation of international transportation services, R&D services and design services, zero VAT rate applies. For exportation of other Taxation Services, VAT exemption applies.

Circular Caishui
[2011] No. 133

2011-12-29

2012-01-01

Pilot VAT reform in Shanghai

Following the Circular Caishui [2011] No.111, in the context of the pilot VAT reform in Shanghai, SAT further issued this Circular to address several tax issues such as VAT treatment for sale of self-used fixed assets, Business Tax adjustment for the previous year, etc.

SAT Announcement
[2011] No. 64

2011-11-30

2012-01-01

Revision on CIT declaration forms

The State Administration of Taxation ("SAT") issued the revised version of Corporate Income Tax ("CIT") monthly/quarterly declaration forms. Enterprises shall use the new forms starting from 1 January 2012.

SAT Announcement
[2011] No. 71

2011-12-09

2012-01-01

Outstanding input VAT of a general VAT payer which changes its business location

This Announcement clarifies that the outstanding Input VAT remains creditable for an enterprise which changes its business location and, consequently, the competent tax authority.

The Announcement provides detailed guidance on how the two tax authorities shall communicate with each other to ensure the credibility of the outstanding Input VAT.

SAT Announcement [2011] No. 73

2011-12-14

2011-01-01 – 2015-12-31

Management Measures on VAT refund for domestic equipments purchased by R&D centres

Under the old Circular Caishui [2011] No.88, qualified R&D centres ("R&D centres") can apply for import duty and import VAT exemption for qualified imported R&D equipments and a full refund of the input VAT paid for qualified domestic R&D equipments.

This Announcement provides the relevant procedure and document requirements for the above input VAT refund concerning purchase of qualified domestic R&D equipments. E.g. the Announcement stipulates that the VAT refund shall be applied within 180 days after the issuance of the VAT invoices. However, for VAT invoices obtained before 14 December 2011, the relevant VAT refund application deadline is 30 April 2012.

SAT Announcement
[2011] No. 78

2011-12-29

2012-01-01

VAT invoices verified but not credited within stipulated period

Under the current PRC tax law, the genuineness of VAT invoices shall be verified by the tax authority within 180 days after the issuance of the VAT invoices. Further, verified VAT invoices shall be declared and credited against Output VAT before the 15th of the next month. It happens that for whatever reasons tax payers fail to credit verified VAT invoices within the stipulated time period.

This Announcement now allows the creditability of such verified but un-credited VAT invoices, if the failure to credit was caused by certain stipulated uncontrollable events.

For such un-credited VAT invoices obtained after 1 January 2007 but before 1 January 2012, tax payers can apply with the tax authorities before 30 June 2012 to make them creditable again, if the failure to credit within the stipulated time period was caused by the reasons stipulated in the Announcement.

Enterprises with overdue verified-but-not-credited VAT invoices are advised to check if such invoices can be made creditable again under the Announcement. If so, they shall apply with their tax authorities before 30 June, 2012.

SAT Announcement
[2012] No. 1

2011-01-06

2012-02-01

VAT issues regarding general tax payers selling self-used fixed assets

This Announcement clarifies that a general VAT payer is eligible for a lower VAT rate of 4% (and the tax amount is further reduced by 50%) when it sells self-used fixed assets under the following two situations:

1. The tax payer was a small-scale VAT payer when it purchased the fixed assets (therefore no input VAT could be credited) and it has become a general VAT payer when the fixed assets are sold;

2. Although being a general VAT payer, it adopts a simplified VAT calculation method for certain taxable income (i.e. no Input-Output VAT credit system shall be used for such income), and therefore, the relevant Input VAT for the fixed assets related to such taxable income is non-creditable and has not been credited.

Under the above situations, the general VAT payer cannot issue VAT invoices for the sale of the relevant self-used fixed assets.