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TAX & FINANCE: VAT Legislation in Full Swing. Highlights of the Consultation Draft
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VAT Legislation in Full Swing
Highlights of the Consultation Draft

BT 202001 TAX 01The Value-added Tax (VAT) regime has undergone a series of reform, in particular the major Business Tax to VAT reform which commenced in 2012, since its introduction in 1994. The VAT regime is now ready for the legislation process.
 

In order to follow the principle of legislating tax collection, the Ministry of Finance and the State Taxation Administration jointly incorporated the achievements of the VAT reform and issued the Consultation Draft of the VAT Law of the People’s Republic of China (hereinafter referred to as “the Consultation Draft”) on 27 November 2019 to solicit public comments.
 

Based on the prior experience in legislating other taxes, it is reasonable to anticipate the VAT Law may be promulgated after deliberation and approval by the National People’s Congress in 2020.
 

We have performed preliminary analysis on the Consultation Draft immediately upon its release and identified the differences as compared with the prevailing VAT regulations. We hope our analysis will help enterprises to have a better understanding of the Consultation Draft. Meanwhile we will collect comments from enterprises and formulate and submit these comments to the relevant authorities during the legislation process.
 

For tax rates which have attracted the most attention, the Consultation Draft has inherited the three rate brackets under the current VAT regulations. Considering the trend of tax reduction in the last couple of years and the guidance of the State Council on simplifying the VAT rate brackets from three to two, it is important to monitor closely whether adjustment and simplification of VAT rate brackets will be included in the final draft VAT Law to be submitted to the Nation People’s Congress for review and discussions.
 

增值税制度自1994年正式确立,特别是经历了2012年以来营改增等一系列重大改革,目前的立法条件已经成熟。按照国家“落实税收法定原则”的总体要求,财政部、国家税务总局在2019年11月27日向社会公布了《中华人民共和国增值税法(征求意见稿)》(以下简称“征求意见稿”),向全社会征集立法意见,最终将以法律形式巩固增值税改革成果,进一步推动我国税收法律体系全面完善。根据之前的税收立法经验,增值税法有可能在明年经全国人大审议通过后正式出台。
 

对于征求意见稿,普华永道在第一时间进行了研读,并对其与现行增值税政策(以下简称“现行政策”)有所区别之处进行初步分析,希望有助于企业进一步理解和掌握征求意见稿的内容。同时我们将在此基础上广泛收集企业反馈提炼立法建议,并上报国家层面,为增值税立法做出应有的贡献。
 

在最受关注的税率方面,征求意见稿承袭了现行增值税政策下的三档税率。考虑到近两年减税降费的大环境以及国务院对于税率简并给出的“三档并两档”的方向指引,我们认为需要密切留意增值税法草案在最终提交全国人大以及人大审议过程中是否会涉及税率的调整及简并。
 

In detail

In comparing with the prevailing regulations, the Consultation Draft has the following major changes:
 

详细内容

与现行政策相比,征求意见稿的主要变化如下:

BT 202001 TAX 021. Revision of taxable threshold

In the Consultation Draft, the taxable threshold for sales turnover is adjusted to RMB300,000 per quarter. Organisations and individuals whose sales turnover is below the taxable threshold are not taxpayers specified in the VAT Law; however, they can still elect to pay VAT in accordance with the VAT Law on a voluntary basis.
 

In the article, the taxable threshold is the same amount as the VAT exemption - amount of VAT small-scale taxpayer as defined in the prevailing regulations. However, it also specifies that organisations and individuals whose sales turnover is below the taxable threshold are not taxpayers under the VAT Law. Comparing with the prevailing regulations, further clarifications will be required on areas such as: (1) whether existing VAT general taxpayers are eligible for such taxable threshold policy; (2) how to manage organisations and individuals who are not taxpayers under the VAT Law; and (3) whether foreign organisations and individuals are eligible for such taxable threshold policy.
 

一、修改起征点规定

在征求意见稿中,规定增值税起征点为季销售额三十万元。销售额未达到增值税起征点的单位和个人,不是本法规定的纳税人;销售额未达到增值税起征点的单位和个人,可以自愿选择依照本法规定缴纳增值税。
 

在该条款中,起征点的金额与原小规模纳税人的免征额一致,但规定了“销售额未达到增值税起征点的单位和个人,不是本法规定的纳税人”,和现行政策相比需进一步明确的问题包括现行一般纳税人是否可以适用起征点政策,对于“不是本法规定的纳税人”如何管理,境外单位和个人是否可以适用起征点政策。
 

2. Specifying purchaser as the withholding agent

Under the prevailing regulations, for foreign organisations or individuals performing services or conducting taxable activities in China, if they do not have place of business or agent in China, the Purchaser will be the withholding agent. This requirement has been modified in the Consultation Draft as “for foreign organisations or individuals conducting taxable transactions in China, the Purchaser will be the withholding agent”.
 

The amendments clarify the withholding obligation of the Purchaser and the Purchaser no longer has to assess whether the foreign organisations or individuals have place of business or agent in China, which makes provides more clarity on the tax obligations and the tax withholding implementation procedure which will be more convenient for both parties.
 

二、明确购买方为扣缴义务人

在现行政策中,境外的单位或者个人在境内销售劳务或发生应税行为,在境内未设有经营机构的,或没有代理人的,以购买方为扣缴义务人。在征求意见稿中修改为境外单位和个人在境内发生应税交易,以购买方为扣缴义务人。
 

此处修改明确了购买方的扣缴义务,购买方不需要去判断境外单位或个人在境内是否有经营机构或代理人,权利义务更加明晰,也更便于操作。

BT 202001 TAX 033. Consolidating the taxable scope

The Consultation Draft amended the definition of taxable scope by including “processing, repair and installation services” into “services” scope and listing “trading of financial products” as a separate sub-category in the “services” scope, which is more in line with the substance of the transaction. Since there is no change on the applicable tax rate, there may not be any substantial difference comparing with the prevailing regulations.
 

It is also important to note that, currently domestic enterprises outside Special Customs Supervision Areas (“SCSA”) which provides processing, repair and installation services to enterprises in SCSA are eligible for VAT refund, while the provision of other services are not eligible for VAT refund. The corresponding policies and practices may need to be further clarified later.
 

三、整合征税范围

征求意见稿将“加工、修理修配劳务”并入“服务”,将“销售金融商品”在“服务”中单列,以更加符合交易实质。由于对应的税率并未发生变化,可能与现行政策没有实质性差异。
 

需要注意的是,目前境内区外企业向海关特殊监管区域内企业提供加工、修理修配劳务是有入区退税政策的,但是向海关特殊监管区域内企业提供服务不能入区退税,相关的具体政策和操作可能需要进一步明确。
 

4. Refining the concept of conducting taxable transaction “in China”

The Consultation Draft has modified the concept of conducting taxable transaction in China from “the seller or purchaser of services (excluding leasing of immovable properties) and intangible assets (excluding the right to use natural resources) is domiciled in China” into “sale of services, intangible assets (excluding the right to use natural resources) by domestic organisations and individuals, or the services and intangible assets are consumed in China’’. The wording of “purchaser is domiciled in China’’ has been removed.
 

Foreign organisations or individuals selling services or intangible assets which are consumed in China to other overseas organisations or individuals should pay attention to the difference with the prevailing policies.
 

四、整合“境内”发生应税交易的概念

征求意见稿将现行的“服务(租赁不动产除外)或者无形资产(自然资源使用权除外)的销售方或者购买方在境内”改为“销售服务、无形资产(自然资源使用权除外)的,销售方为境内单位和个人,或者服务、无形资产在境内消费”,删除了“购买方在境内”的表述。
 

对于境外单位或者个人向其他境外单位或者个人销售在境内消费的服务或者无形资产,需要注意与现行政策的差异。

BT 202001 TAX 055. Narrowing the scope of deemed sales

The scope of deemed taxable transactions in the Consultation Draft does not cover consignment sales, transfer of goods between organisations under the same taxpayer, investment, distribution to shareholders or investors and provision of service for no consideration.
 

For consignment sales and goods moving between organisations under the same taxpayer, with the rapid development of the logistics industry in China, deemed sales treatment relating to these items rarely applies nowadays. For investment and distribution to shareholders or investors, the deemed sales treatment is less meaningful now since: (1) the prevailing regulations already allow the transfer of assets under a restructuring transaction where a business is being wholly or partly transferred to be exempt from VAT; (2) even if the transfer of such assets is subject to VAT, the transferee can still claim input VAT credit or refund upon obtaining VAT Special Invoice.
 

For the provision of services for no consideration, considering the intangible nature of the services, the deemed sales treatment is relatively less being applied in practice. It is also difficult for the tax authorities to determine whether there are services provided for no consideration. Hence, it is reasonable to remove this item from the scope of deemed taxable items.
 

The Consultation Draft excludes situations of public welfare undertakings from the deemed taxable scope, which conform to the basic direction of encouraging enterprises and individuals to contribute to public welfare undertakings, and also cover some of the prevailing VAT exemption policies. At the same time, the Consultation Draft also removes the item "targeting to the public" from the exclusion scope of deemed sales, which may be due to difficulty in making the assessment.
 

五、缩小视同销售范围

征求意见稿中的视同应税交易,其范围未包括现行政策中的代销、机构间移送、投资、对股东或投资者的分配以及无偿提供服务。
 

关于代销和机构间移送货物的视同销售,随着我国物流业的高速发展,目前已经很少适用。关于投资和对股东或投资者的分配,由于在以货物、无形资产或不动产进行投资或分配的过程中,实质上有对价产生,会计上通常也按销售处理,所以投资或分配本身属于销售,不需要特别做视同销售处理;同时,转让方缴纳增值税,受让方取得增值税专用发票进项抵扣或留抵退税,对于关联方来说总体税负不变。
 

关于无偿提供服务,由于服务的无形性,对于服务的视同销售在实际操作中较少适用,且是否无偿提供了服务在税收监管中也难以判定。以上视同销售内容的取消均存在合理性,且在实际操作中对于税收的影响不大。
 

征求意见稿中的视同应税交易,将用于公益事业的情况除外,符合鼓励企业和个人为公益事业做贡献的基本导向,也覆盖了目前的部分免税政策。同时,征求意见稿取消了“以社会公众为对象”的除外事项,原因可能在于该事项的内涵难以明确界定。
 

6. Refining the scope of non-taxable items

Comparing with the prevailing regulations, the Consultation Draft removes a number of non-taxable items such as “provision of services by an organisation or sole proprietor to its employees ”, “provision of railway and aviation services for no consideration in accordance with the State’s directives”, “insurance claims received by insured person”, and “housing special maintenance fund collected by housing authorities or designated organisations, provident fund administration centres, development enterprises and property management organisations”. It also removes the transfer of goods, immovable properties and land use right involved in the assets restructuring, where all or part of a business is transferred as a whole, from the non-taxable items, which is in line with the removal of relevant items in the scope of deemed sales as discussed above.
 

六、整合不征收增值税范围

和现行政策相比,征求意见稿中的不征税政策删除了“单位或者个体工商户为聘用的员工提供服务”,“根据国家指令无偿提供的铁路运输服务、航空运输服务”,“被保险人获得的保险赔付”,“房地产主管部门或者其指定机构、公积金管理中心、开发企业以及物业管理单位代收的住宅专项维修资金”等事项。另外删除了在资产重组过程中,整体资产转让中涉及的货物、不动产、土地使用权,该政策实质上可在上一条取消视同销售政策的范围中实现。
 

7. Introducing the “relevance” concept of input VAT

The Consultation Draft introduces a new concept that input VAT should be “related to the taxable transactions”. In practice, the determination of whether the input VAT is related to taxable transactions could be difficult and uncertain. Meanwhile, the Consultation Draft also includes “VAT paid or borne in acquiring financial products” as one of the input VAT items, which indicates there could be a change of the prevailing VAT practice for trading of financial products, from net basis method to gross basis method with input VAT credit.
 

七、进项税额引入相关性概念

征求意见稿中,对于进项税额的概念,加入了“与应税交易相关”的表述。在实务操作中,判断是否与应税交易相关的问题存在难度和不确定性。同时,征求意见稿对于进项税额加入了购进金融商品支付或负担的增值税额,现行转让金融商品的销售额扣除政策有可能转变为进项抵扣政策。

BT 202001 TAX 078. Clarifying the policy of input VAT credit balance refund

Based on the prevailing policy for excess input VAT refund, the Consultation Draft clarifies that, when the amount of input VAT is greater than the amount of output VAT in a tax filing period, the excess amount can be carried forward to the next period or refunded. This will provide a lawful refund mechanism for the refund of input VAT balance and also authorise the finance and tax authorities of the State Council to formulate specific measures.
 

The mechanism of input VAT balance refund helps enterprises to effectively reduce the cost of capital. China implemented the pilot scheme of input VAT refund in 2018, which benefits 18 designated industries including certain advanced manufacturing industries, modern services industries and power grid enterprises. Effective from 1 April 2019, the mechanism of incremental input VAT refund was also introduced to all industries.
 

If the principal of input VAT credit balance refund can be confirmed in the new VAT Law, it will be conducive to the implementation of the input VAT refund mechanism gradually and improve cash flow of enterprises.
 

八、明确留抵退税政策

在现行增量留抵退税政策的基础上,征求意见稿中明确,当期进项税额大于当期销项税额的,差额部分可以结转下期继续抵扣,或者予以退还。在法律上建立期末留抵退税制度,并授权国务院财政、税务主管部门制定具体办法。
 

留抵退税制度可以有效节约企业资金成本。中国在2018年首次进行大规模留抵退税的试点,惠及装备制造等先进制造业、研发等现代服务业等18类行业及电网企业。2019年4月1日进一步对全行业实行增量留抵退税制度。
 

此次增值税立法中如果能够将留抵退税的原则予以明确,必然会有助于逐步推进留抵退税制度的落实,改善企业现金流,提升企业的获得感。
 

9. Enhancing the arrangement for non-creditable input VAT items

Under the prevailing regulations, input VAT generated from catering services, resident daily services and entertainment services are not creditable. In the Consultation Draft, the condition of “acquired and consumed directly” was added for determining non-creditable input VAT items, which may imply that the input VAT generated from purchase of catering services, resident daily services and entertainment services which forms a part of the final product of an enterprise can be credited. This may have a significant positive impact to enterprises engaging in catering platform, traveling and exhibition business. Meanwhile, input VAT generated from purchase of loan services is still not creditable.
 

九、完善不得抵扣进项税额的安排

在现行政策中,餐饮服务、居民日常服务和娱乐服务对应的进项税额全部不得抵扣;在征求意见稿中,加上了“购进并直接用于消费”的相关条件,这可能意味着购买餐饮服务、居民日常服务和娱乐服务形成企业的最终产品的情况下,购买这部分服务对应的进项税额有可能可以抵扣,对于餐饮平台企业、旅游业企业、会展业企业等可能形成重大利好。另外征求意见稿中购进贷款服务仍不能抵扣进项。
 

10. Enhancing the calculation of composite assessable value of import goods

In the Consultation Draft, for the calculation of composite assessable value of import goods, it changes the term “duty paid value” to ‘dutiable value”, and clarifies that consideration related to trade in services should not be included in the dutiable value.
 

Currently the customs value includes royalties, warranty fees, etc. which is the base for calculating Customs Duty and import VAT payable. At the same time, the tax authorities require the domestic purchasers to withhold VAT for such services provided by overseas vendors, which may create a double taxation issue.
 

The modification in the Consultation Draft eliminates such problem of double taxation. Meanwhile, in current practice, although the VAT may be levied twice, the tax authorities generally allow enterprises to claim credit for both input VAT.
 

十、完善进口货物组成计税价格

征求意见稿将进口货物的组成计税价格中,现行的“关税完税价格”改成“关税计税价格”,并明确关税计税价格中不包括服务贸易相关的对价。
 

由于目前海关对特许权使用费、保修费等并入货物的计税基础或单独征收关税,也以这一部分金额作为计税基础征收进口增值税。同时,税务机关对于这些境外提供的服务或劳务按规定要求境内购买方代扣代缴增值税,存在对于同一标的两次征收增值税的问题。
 

征求意见稿的修改消除了这一重复征税的问题。另外,在目前实际操作中,虽然增值税存在两次征收的问题,但一般情况下税局也允许企业两次抵扣。

BT 202001 TAX 0811. Continuance of the concept of adopting the main business in mixed sale transactions

The Consultation Draft retain the concepts of “concurrent operation” and “mixed sale” in the prevailing regulations, and stipulates that if a single taxable transaction involves two or more tax rates or collection rates, the tax rate or collection rate applicable to the main item of the transaction shall apply.
 

Under such terms, it may be difficult to define whether a transaction belongs to a "single transaction" or "multiple transactions" under a concurrent operation. At the same time, where a company engages in multiple categories of businesses, it is difficult to determine the “main” business/transaction – whether it refers to the main business of an enterprise with the highest amount of sales turnover, or the taxable item with the highest proportion of sales turnover in the specific transaction which involved different taxable items . The assessment period and other detailed matter should also be clarified in subsequent drafts or regulations.
 

十一、延续一项交易从主征收理念

征求意见稿延续了现行政策中的“兼营”和“混合销售”理念,规定了“一项应税交易涉及两个以上税率或者征收率的,从主适用税率或者征收率。”
 

在该规定下,如何界定交易属于“一项交易”还是兼营的“多项交易”存在难点。同时,在企业多种经营的情况下,“为主”指企业按照整体销售额划分的主业,还是仅考虑该项交易涉及的不同品目,计算涉及品目对应的销售额比例并以孰高作为“从主”的依据,以及销售额对应的期间等问题均需要具体明确。
 

12. Continuation of VAT exemption for education services

Under the current regulations, there are VAT exemptions for educational services provided by schools engaged in diploma education; and VAT General Taxpayers who provide non-degree education services can choose to apply the simplified tax calculation method and pau VAT at the 3% levy rate. In the consultation draft, the VAT exemption scope is changed to "education services provided by schools and other educational institutions", which may be good news to other educational institutions which can meet the eligibility requirements.
 

十二、平移教育服务免税范围

在现行政策中,有对从事学历教育的学校提供的教育服务免税;以及一般纳税人提供非学历教育服务,可以选择适用简易计税方法按照3%征收率计算应纳税额。在征求意见稿中,将免税范围更改到之前的“学校和其他教育机构提供的教育服务”,对于除学校外的其他符合资格要求的教育机构可能形成利好。
 

13. Extension of tax filing period

The Consultation Draft removes three VAT assessment basis periods, i.e. “one-day”, “three-day” and “five-day”, and adds a "half year" basis period, which will further reduce the frequency of tax filing and reduce the taxpayer's compliance burden. It should be noted that the half-year period is not applicable to taxpayers who adopt the general tax calculation method.
 

十三、延长纳税期限

征求意见稿中取消了“1日、3日和5日”三个计税期间,新增“半年”的计税期间,该规定将进一步减少纳税人办税频次,减轻纳税人申报负担。需要注意的是以半年为计税期间的规定不适用于按照一般计税方法计税的纳税人。
 

14. Information exchange

The Consultation Draft states that Customs should share information of entrusted VAT collection and the export declaration of goods with the tax authorities; tax authorities and banks, Customs, foreign exchange authorities, market supervision authorities and other departments should establish a VAT information exchange and coordination mechanism, to safeguard the further strengthening of VAT collection and administration.
 

十四、明确信息共享

征求意见稿中明确提出,海关应当将受托代征增值税的信息和货物出口报关的信息共享给税务机关;税务机关和银行、海关、外汇管理、市场监管等部门应当建立增值税信息共享和工作配合机制,为进一步强化增值税征管提供了保障。

BT 202001 TAX 0915. Introduce a mechanism of depositing VAT

The Consultation Draft proposes to stipulate a VAT deposit mechanism which will be formulated by the State Council. The mechanism may refer to international experience such as directly splitting the VAT amount of a transaction and transfer the amount to a separate VAT payment account of the enterprise, which can improve VAT administration and control the behaviour of issuing false invoices.
 

十五、提出缴存增值税额机制

征求意见稿中提出纳税人应当依照规定缴存增值税额,可能会借鉴国际经验,在交易发生时直接拆分增值税额进入企业的增值税缴税账户,以完善增值税管理,遏制虚开发票的行为。
 

The takeaway

The deadline for soliciting public comments on the Consultation Draft is 26 December 2019. The public can submit their comments through the official website of Ministry of Finance or by mail. The above insight summarises our preliminary analysis of the Consultation Draft, and we shall continue to pay close attention to the development of VAT legislation and timely share our observations with you.
 

注意要点

《中华人民共和国增值税法(征求意见稿)》的意见征集截止时间为2019年12月26日,社会公众可以通过登陆财政部网站和邮寄信函方式对征求意见稿提出意见。本篇新知是对征求意见稿的初步分析,我们会继续关注增值税法的立法进程并及时分享我们的观察。

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