CHINA EXTENDS PREFERENTIAL VAT POLICY FOR SMALL-SCALE TAXPAYERS UNTIL 31 DECEMBER 2020


Date: 28 May 2020 | Tags: Corporate Finance, VAT | Written by: Dr. Richard van Ostende | Reading time: 3 minutes


INTRODUCTION

On 7 May 2020 China’s State Administration of Taxation (SAT) and Ministry of Finance (MOF) announced that the preferential policy implemented to support small-scale taxpayers will be extended until 31 December 2020.


PREFERENTIAL POLICY

On 28 February 2020, China’s SAT and MOF implemented a preferential policy reducing VAT rates payable by small-scale taxpayers to support micro- and small sized companies during the COVID-19 outbreak.

The original policy was scheduled to have a duration of three months and expire per 31 May 2020. The policy has now been extended to 31 December 2020 and is applicable to all small-scale taxpayers nationwide. The policy details vary slightly for companies located in and outside of Hubei province.


Small-scale taxpayers in Hubei province

  • Small-scale taxpayers subject to a three (3) percent VAT levy rate on their taxable sales will be exempted from VAT; and

  • The prepayment of VAT on items subject to a pre-levy VAT rate of three (3) percent will be suspended.


Small-scale taxpayers outside Hubei Province

  • Small-scale taxpayers subject to a three (3) percent VAT levy rate on their taxable sales will be reduced to one (1) percent; and

  • Prepayment VAT on items subject to a pre-levy VAT rate of three (3) percent will be levied at a reduced rate of one (1) percent.


SOURCES

  • State Administration of Taxation, Ministry of Finance of the People’s Republic of China (2020). Announcement on Supporting the Value-added Tax Policy for the Reinstatement of Individual Industrial and Commercial Households. (SAT [2020] No. 13)

  • State Administration of Taxation, Ministry of Finance of the People’s Republic of China (2020). Announcement on extending the implementation period of the VAT reduction and exemption policy for small-scale taxpayers. (SAT [2020] No. 24)


The information in this article is intended for general information on the subject matter. The content of this article is not intended to replace professional advice on the subject matter in relation to your specific circumstances.

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