China VAT exemption for small-scale taxpayers

The Ministry of Finance and the State Administration of Taxation issued on 24 March 2022 the Announcement [2022] no. 15 "on Exempting Small-scale VAT taxpayers from VAT" to provide additional support for the development of micro and small enterprises.

According to the Announcement, small-scale VAT taxpayers subject to a 3% VAT rate on their sales revenue can be exempted from VAT from 1 April to 31 December 2022.

Previously, according to Announcement [2021] no. 11 issued by the Ministry of Finance and the State Administration of Taxation, small-scale VAT taxpayers with monthly sales not exceeding RMB 150,000 were exempted from VAT from 1 April 2021 to 31 December 2022. The latest policy extended the exemption, including all small-scale VAT taxpayers.

The category of small-scale VAT taxpayers identifies taxpayers engaged in producing goods or providing labour services with an annual VAT taxable revenue not exceeding RMB 5 million. The standard VAT applicable to those taxpayers is 3%, levied on the amount of taxable revenue. Unlike the general VAT taxpayers, the small-scale VAT taxpayers cannot claim input VAT as a credit against output VAT.