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China Issues Clarification Regarding Small Business VAT Exemptions

A clarification with regard to VAT exemptions for small business was issued by the State Administration of Taxation on 19 January.

The circular focussed on four particular aspects of the earlier-announced legislation:

  • Small-scale taxpayers will be exempt from VAT if their total monthly taxable sales do not exceed RMB100,000 (or RMB300,000 if the tax is assessed on a quarterly basis)
  • Small-scale taxpayers whose monthly sales are over RMB100,000 but not exceeding RMB100,000 after the deduction of any revenue derived from the sales of immovable property are exempt from VAT on the sale of goods, labour services, other services and intangible assets
  • The rental income obtained by ‘any other individuals’ (as referred to in Article 9 of the Detailed Rules for the Implementation of the Interim Regulations on VAT) from the lease of immovable property in the form of lump sum rental may be evenly apportioned across the course of the corresponding rental period. Any monthly rental income not exceeding RMB100,000 (after said apportionment) is then VAT-exempt
  • General taxpayers with total sales of RMB5 million (or less) for 12 consecutive months (in the case of a monthly tax assessment period) or for four consecutive quarters (in the case of a quarterly tax assessment period), may opt to change their registration from that of “general taxpayer” to “small-scale taxpayer” prior to 31 December 2019

All the above is deemed to have retrospectively come into effect as of 1 January 2019.

For further details, please access the following links:

Announcement on Tax Collection Administration Issues in the Policy of Exemption of Value-Added Tax for Small-Scale Taxpayers (in Chinese)

China Announces Big Tax Cuts for Small Businesses

China Announces Tax Concessions for Small and Micro-Businesses

Content provided by Picture: HKTDC Research
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