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Value Added Tax (VAT) Policies 2021

Some of the notable preferential Value Added Tax policies valid in the People’s Republic of China in 2021 implemented by the Chinese Ministry of Finance (MOF) and State Taxation Administration (STA) in several Circulars provide tax incentives, including value-added tax (VAT) incentives, to help businesses affected by the Covid-19 outbreak in 2020. The VAT incentives include VAT exemptions for certain industries as well as excess input VAT refund for manufacturers.

Value-added Tax Exemption Policy for Small-scale Taxpayers implemented by the Policy on Inclusive Tax Reliefs for Small and Micro Enterprises (Cai Shui [2019] No.13) states that a small-scale taxpayer that carries out sales acts subject to value-added tax (VAT) with total monthly sales amounting to CNY 150,000 or below (or quarterly sales amounting to CNY 450,000 or below if one quarter is a tax period, hereinafter the same) shall be exempted from VAT.

For advanced manufacturing industries there is a continued policy for the refund of incremental uncredited tax, (i.e. taxpayers who manufacture and sell non-metallic mineral products, general equipment, special equipment and computers, communications and other electronic equipment in accordance with the Industrial Classification of National Economic Activities with the sales accounting for over 50% of the total sales) who meet the following conditions simultaneously may apply to the competent tax authorities for a refund of incremental uncredited tax and subsequent tax declaration periods:

- the incremental uncredited tax is greater than zero;

- the tax credit rating is Class A or B;

- the taxpayer does not gain the refund of uncredited tax or tax rebates for exports by cheating or issuing special value-added tax ("VAT") invoices for non-existent transactions, at any time during the 36 months prior to its application for a tax refund;

- the taxpayer does not receive punishments imposed by the relevant tax authority twice or more within 36 months prior to its application for a tax refund; and

- the taxpayer does not enjoy the policies of levying and refund and rebate (refund) after collection as of April 1, 2019.

Relating to the collection of value-added tax for the distribution of used vehicles VAT will be levied at the reduced rate of 0.5% when taxpayers engaged in the distribution of used vehicles sell the used vehicles which they have acquired.

In the Guangdong-Hong Kong-Macao Greater Bay Area, value-added tax refunds are available at the port of embarkation for any container cargo that departs from the Guangzhou Nanshan Bonded Port or the Shenzhen Qianhai Bonded Port.


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