January 2023 - New policy update: China VAT State Taxation Bureau Announcement

New policy update: China VAT State Taxation Bureau Announcement: 

China VAT reduction and exemption policy for small-scale taxpayers in 2023: 

The goal of this policy update is to reduce the tax burden on so-called small-scale taxpayers, and to help these taxpayers grow their businesses. The Chinese tax authority released this announcement [2023 NO #1] of the State Administration of Taxation, Ministry of Finance General Administration of Taxation. Here are the highlights: 

1. From January 1, 2023 to December 31, 2023, small-scale VAT taxpayers with monthly sales of less than RMB 100,000 (inclusive) will be exempted from paying VAT. 
2. From January 1, 2023 to 31 December 2023, small-scale VAT taxpayers whose applicable VAT rate is 3%, will be reduced to a rate of 1%; for those who are levied VAT using the pre-levy rate of 3%, the reduction to a rate of 1% will determine the payable VAT. 
3. From January 1, 2023 to December 31, 2023, the VAT additional deduction policy shall be implemented in accordance with the following provisions:

Taxpayers in productive service industries are allowed to deduct 5% of the deductible input tax for the current period to offset the tax payable. Taxpayers in the productive service industry refer to taxpayers whose sales from the provision of postal services, telecommunications services, modern services and daily life services account for more than 50% of all sales. 

This policy allows taxpayers in the life service industry to deduct 10% of the deductible input tax for the current period to offset the tax payable. Taxpayers in the life service industry refer to taxpayers whose sales from the provision of life services account for more than 50% of all sales. 　　 

Other matters related to taxpayers' application of the additional deduction policy shall be implemented in accordance with the Announcement of the General Administration of Taxation of the Ministry of Finance on Deepening the Relevant Policies of the Value-Added Tax Reform (Announcement No. 39 of 2019 of the General Administration of Taxation of the Ministry of Finance) and the Announcement of the State Administration of Taxation of the Ministry of Finance on Clarifying the VAT Super-deduction Policy for the Daily Life Service Industry (Announcement No. 87 of 2019 of the State Administration of Taxation of the Ministry of Finance) and other relevant provisions.

4. In accordance with the provisions of this announcement, the portion of the VAT reduction may be deducted or refunded if it has been levied before the issuance of this announcement.