20 Common problems of Small-scale taxpayer enterprises in China

2020/11/09

According to the finance administration of taxation on implementing the small micro enterprise general tax breaks notice (caishui [2019] no. 13) and the state administration of taxation on the small-scale taxpayers shall be exempt from value-added tax policy announcement on the problem of collection and management (the state administration of taxation announced no. 4, 2019), China's small-scale taxpayers VAT taxable sales activity, total sales does not exceed 100000 RMB per month (by a quarter for a tax payment period, quarter sales does not exceed 300000 RMB), shall be exempt from value-added tax. The tax exemption standard for the monthly sales of China's small-scale taxpayers will be raised this time. The policy applies to taxpayers with annual taxable sales of less than 5 million RMB who are Chinese small-scale taxpayers. 

1. Is the monthly sales of Chinese small-scale taxpayers over 100,000 RMB more than part of the tax payment or full tax payment?

A: For Chinese small-scale taxpayers who pay monthly tax, if the monthly sales amount exceeds 100,000 RMB, they need to pay VAT in full.

2. Can Chinese small-scale taxpayers with monthly sales of more than 100,000 RMB but quarterly sales of less than 300,000 RMB be exempted from VAT?

A: If you are a Chinese small-scale taxpayer who pays monthly taxes, you are not eligible for tax exemption if your monthly sales exceed 100,000 RMB. If it is a Chinese small-scale taxpayer who pays quarterly tax, then the sales volume of a certain month in a quarter exceeds 100,000 RMB, but the quarterly sales volume does not exceed 300,000 RMB, it can enjoy tax exemption according to regulations.

3. What is the monthly (quarterly) sales caliber of the VAT exemption standard for China's small-scale taxpayers?

Answer: "the state administration of taxation on the small-scale taxpayers shall be exempt from value-added tax policy announcement on the problem of collection and management (the state administration of taxation announced in 2019, no. 4) regulation, the taxpayer to all VAT taxable sales behavior (including sales of goods, services, services, intangible assets and real estate) combined sales, determine whether reach the standard duty free. At the same time, the sales of goods, labor services, services and intangible assets obtained by Chinese small-scale taxpayers with total monthly sales of more than 100,000 RMB but still less than 100,000 RMB after deducting the sales of real estate in the current period shall be exempted from VALUE-ADDED tax.

4. How to define the scope of VAT exemption policy for small-scale taxpayers in China?

A: The tax exemption standard for China's small-scale taxpayers will be raised this time. The policy applies to Chinese small-scale taxpayers with annual taxable sales of less than 5 million RMB. There is no other standard, and there is no corresponding relation with small and micro enterprises in the Standard provisions on Classification of Small and Medium-sized Enterprises issued by four ministries.

5. The effect of tax exemption policy may be different for Chinese small-scale taxpayers with different tax payment periods. Can Chinese small-scale taxpayers choose to pay monthly or quarterly taxes?

A: Chinese small-scale taxpayers who pay taxes in a fixed period may choose to pay monthly or quarterly taxes according to their actual business conditions. In order to ensure that the taxpayer's tax payment period within the year is relatively stable, once the taxpayer chooses, it cannot be changed within an accounting year. A fiscal year is the first 12 months of the year, not the year after the date of selection. A taxpayer may, at any time during each fiscal year, propose to the competent tax authorities to change its tax payment period. However, once the taxpayer chooses to change its tax payment period, it may not change it again before December 31 of the same year.

6. How does the change of tax payment period in a quarter affect the tax exemption policy of enjoying VAT monthly sales less than 100,000 RMB?

Answer: taxpayer changes pay taxes deadline (include change by month to change by quarter or change by quarter to change by month) actual application time is different, the effective time of pay taxes deadline after its change is different. If the applicant applies for a change in the tax payment period within the first month of a quarter, he may file and pay tax within the changed tax period starting from the quarter in which the change is applied; If an application for a change in the tax payment period is filed within the second or third month of a quarter, the tax payment period prior to the change shall still be filed within the current quarter of the change, and the tax payment period after the change may be filed starting from the next quarter.

For Chinese small-scale taxpayers who file monthly tax returns and pay tax on a quarterly basis, they may file tax returns and pay tax on a quarterly basis starting from the quarter in which they apply for the change, and the exemption standard of the quarterly sales not exceeding RMB 300,000 RMB is applicable. If the change is applied for quarterly filing and tax payment in the second or third month of the quarter, the tax declaration and tax payment shall still be made monthly in the quarter in which the change is applied. The tax exemption standard of monthly sales not exceeding RMB 100,000 shall be applied. The tax exemption standard of quarterly sales not exceeding RMB 300,000 shall be applied from the next quarter.

7. A construction enterprise has several projects in the same pre-paid land, each project is not more than 100,000 RMB, but the monthly total sales amount is more than 100,000 RMB, which is the standard?

Answer: there are many projects within the jurisdiction of the competent tax authorities in the same pre-paid place, according to the total sales of all projects that month whether the judgment exceeds 100,000 RMB.

8. Is the monthly sales realized at the pre-paid place before or after deduction? If construction services are provided, shall we confirm whether the subcontracted balance after deduction of the general contractor exceeds RMB 100,000 or the amount before deduction?

Answer: the monthly sale that prepay ground realizes points to the sale after difference deducts. If the taxpayer provides construction services, the sales amount shall be confirmed according to the total contract amount after deducting the subcontracted balance, so as to determine whether the tax exemption policy of RMB 100,000 RMB for small-scale taxpayers in China is applicable.

9. What is the scope of the transfer registration as a Chinese small-scale taxpayer in 2019?

Answer: "the state administration of taxation on the small-scale taxpayers shall be exempt from value-added tax policy announcement on the problem of collection and management (the state administration of taxation announced in 2019, no. 4) in article 5 of the regulations, turned 12 consecutive months before registration (in 1 month for a tax payment period) or four straight quarters (in one quarter for a tax payment period) accumulative total sales of more than 5 million RMB in average taxpayer, on December 31, 2019, may choose to transfer registration for Chinese small-scale taxpayers.

10. Is there any time requirement to register as a Chinese small-scale taxpayer after 2019?

A: There is no time requirement. If the business period before the registration date is less than 12 months or 4 quarters, the accumulative sales volume shall be estimated according to the average monthly (quarterly) sales volume to determine whether the conditions for registration transfer are met.

11. If a general taxpayer is registered as a small-scale taxpayer in China, how should the cumulative sales be calculated?

Answer: accumulative total taxable sale amount is calculated, answer according to "method of administration of registration of general taxpayer of value added tax" (state taxation administration makes no. 43) regulation is carried out, include pay tax declare sale amount, check make up sale amount, pay tax to evaluate adjust sale amount. For taxpayers who sell services, intangible assets or immovable property for deduction items, the taxable annual sales amount shall be calculated as the sales amount before deduction. In addition, the sales of intangible assets and transferred immovable property accidentally generated by the taxpayer shall not be included in the taxable annual sales.

12. For a branch of a general taxpayer that has implemented consolidated tax payment, if the annual sales volume of the branch reaches less than 5 million RMB, can the branch be transferred to be registered as a Chinese small-scale taxpayer?

Answer: the branch office that executes summary pay taxes is after cancelling summary pay taxes, accord with to turn the formalities that register a condition to be able to deal with to turn register.

13. Chinese small-scale taxpayers issue general VAT invoices on behalf of the tax rate showing ***. How to fill in the VAT return form?

A: For the general VAT invoice issued by Chinese small-scale taxpayers on behalf of the tax authorities, the total amount of the monthly invoice issued by the tax authorities does not exceed 100,000 RMB, and the tax rate column shows ***, the situation of the VAT application form is as follows:

If the current sales volume of Chinese small-scale taxpayers exceeds RMB 100,000 RMB (RMB 300,000 RMB per quarter), the tax rate applicable to the current sales volume shall be confirmed in accordance with the relevant policies and the corresponding column of VAT Return (Applicable to Chinese small-scale taxpayers) shall be filled out accurately.

If the current sales volume of Chinese small-scale taxpayers does not exceed 100,000 RMB (300,000 RMB per quarter), the current sales volume shall be filled into the column related to tax-free sales volume in the VAT Tax Return (Applicable to Chinese small-scale taxpayers) in accordance with the regulation of State Administration of Taxation No. 4 of 2019.

According to the current policy, if the real estate business of small-scale taxpayers in China occurs in the current period, the current sales amount after deducting the real estate sales amount shall be used to judge whether it exceeds RMB 100,000 RMB (RMB 300,000 RMB per quarter).For small-scale taxpayers in China who are subject to the VAT differential tax policy, they will judge whether the difference exceeds RMB 100,000 RMB (RMB 300,000 RMB per quarter) by the current sales amount after the difference.

14. What are the regulations on the threshold of VAT?

Answer: value added tax threshold, still according to "the People's Republic of China value added tax is provisional regulation implement detailed rules" and "business tax is changed levy value added tax pilot implement method" carry out. Namely: pay tax on schedule, it is monthly sale 5000-20000 RMB (contain this number), press pay tax once, it is every time (day) sale 300-500 RMB (contain this number).Small-scale taxpayers, either in his previous China sales of 2-30000 RMB per month (quarterly 6-90000 RMB) shall be exempted from VAT regulation, or since January 1, 2019 will be China's small-scale taxpayers tax standards from the monthly sales of 30000 RMB to 100000 RMB (quarter from 90000 RMB to 300000 RMB), did not adjust the VAT minimum threshold.

15. If the special ticket is lost after the payment of tax, and the loss procedure is handled according to the current regulations, and the special invoice in scarlet is issued later, can I apply for refund of tax?

Answer: after value added tax general taxpayer opens bill of special value added tax, produce the circumstance such as sale return, make out an invoice to make an error, taxable service suspends but do not accord with bill to become invalid condition, perhaps because sell goods partial return and produce sale allowance, can open scarlet letter special bill. If the tax authorities issue special invoices on behalf of small-scale Chinese taxpayers and need to issue special invoices with red characters, they shall handle the matter in accordance with the method of issuing special invoices with red characters for general taxpayers. After issuing the special scarlet letter invoice, the taxpayer may apply to the competent tax authorities for a refund of the tax already paid.

16. How to solve the difficult problem of VAT exemption policy implementation caused by the original invoice's inability to return red stains?

A: Since the Chinese small-scale taxpayers issue VAT invoices, the downstream general taxpayers can deduct the tax indicated on the special invoices. In order to ensure the integrity of the VAT deduction chain, the Special VAT invoices issued by Chinese small-scale taxpayers to the tax authorities should be issued after the payment of VAT. Chinese small-scale taxpayers sales does not exceed 100000 RMB per month (by a quarter for a tax payment period, quarter sales does not exceed 300000 RMB), the current due to issue special VAT invoices already paid taxes, in the special VAT invoices all sheets after recovering or scarlet letter special invoice issued by the regulation, can apply for to return to the competent tax authority.

About the scarlet letter the VAT invoice in accordance with the state administration of taxation issued announcement concerning the issues announcement no. 2016, 47 (state administration of taxation) regulation, if the buyer has special invoice have been used to declare the deduction, you need to VAT tax from the input tax transshipment, and fill in "the scarlet letter special VAT invoice issued information table", by the tax authority according to check through the information form for the scarlet letter special invoice, sellers must do not need to return the original invoice.

17. After the VAT exemption standard is increased, will the standard of cultural undertakings construction fee be increased? Whether does cultural undertaking construction cost apply press a month 100 thousand RMB press the regulation of quarter 300 thousand RMB?

Answer: When standard of tax-free of Chinese small-scale taxpayer is 20 thousand RMB, the capture that monthly sale of Chinese small-scale taxpayer does not exceed 20 thousand RMB is obligatory duty payer, exempt at the same time cultural undertaking construction fee. After the tax exemption standard for small-scale taxpayers in China is raised to 30,000 RMB, taxpayers with monthly sales of up to 30,000 RMB will also be exempted from the cultural construction fee. However, this policy has a clear period of implementation and has expired and ceased to be implemented on December 31, 2017.After the tax exemption standard for small-scale taxpayers in China was raised to 100,000 RMB, no document was issued to increase the exemption standard for cultural undertakings. Accordingly, carry out monthly sale not to exceed 20 thousand RMB at present exempt the policy of cultural undertaking construction fee.

18. For Chinese small-scale taxpayers who pay monthly tax, the sales of last month will be returned in this month. The actual sales of this month exceed 100,000 RMB.

Answer: according to current policy regulation, taxpayer applies simple plan tax method plan tax, because sale is returned and the sale that returns to buy buyer, ought to deduct from current sale in. Therefore, small-scale Chinese taxpayers who have sales returns shall deduct the corresponding sales returns from the actual sales of the current period to determine whether the tax exemption policy of less than 100,000 RMB is applicable.

19. If the newly established or cancelled Chinese small-scale taxpayers declare quarterly, and the actual period of operation is less than one quarter, shall they enjoy preferential treatment according to the actual period of operation or on a quarterly basis?

A: From the perspective of favorable policies for Chinese small-scale taxpayers, for Chinese small-scale taxpayers who choose to declare on a quarterly basis, whether it is established in the middle of a quarter or written off in the middle of a quarter, the preferential policies shall be judged by 300,000 RMB.

20. Can administrative institutions, residents' committees, village committees and other non-enterprise units enjoy the preferential VAT exemption policy for small-scale Chinese taxpayers based on the apportioned sales proceeds from the advance collection of leased immovable property?

Answer: the rental income that unit of non-enterprise sex collects rent to obtain at one time, do not apply the policy regulation of other individual hire immovable property, cannot enjoy with the sale after apportion preferential sex duty-free policy.