China’s new VAT regulations are good news for SMEs, but add to the complexity of VAT administration and accounting.Small-scale taxpayers in China who were subject to 3% Value Added Tax (VAT) are now exempt from VAT altogether. Prepayment of VAT has also been suspended. The exemption will take effect from April 1 to Dec. 31.To shore up economic stability, China has pledged around 1.5 trillion yuan ($235.47 billion) of VAT rebates to cushion the financial pressure on small firms.In addition, a total of 1.2 trillion yuan of special transfer payments by the central government to regional governments have been arranged to support tax rebates and employment.
What China’s VAT changes mean for your businessThe new regulations are entirely straightforward. If you are an eligible small business now exempt from the 3% VAT rate, there will be no VAT to pay starting from the April 2022 tax period.At the same time, normal accounting standards for small-scale taxpayers continue to apply.For example, exempt businesses are required to issue ordinary tax-exemption invoices showing a zero VAT rate as necessary.Taxpayers who choose to waive the tax exemption are required to issue special VAT invoices with a rate of 3%.
The VAT exemption is effective for new invoices issued from 1 April 2022. In case of sales discounts or refunds after this date, the 3% VAT rate will continue to apply since it refers to transactions made before 1 April.
The impact of the changes on standard monthly or quarterly reporting will have to be carefully calculated and administered.
All this can be time-consuming and confusing for small and medium-sized businesses facing cash flow pressures, while fighting to remain viable and profitable.
The new VAT measures are a valuable contribution to a tax-friendly small business environment. But they may require a significant amount of administration and oversight from the billing company.
How Elite Stage can help with China’s VAT rulesElite Stage has the expertise to help businesses navigate the complexity of China’s VAT regulations.We can handle all recurring tax filing services for clients, taking the new regulations into account and updating tax calculations accordingly.We offer a complete VAT registration and administration service. China’s VAT is being streamlined, with further changes expected. We can keep on top of these changes for you, ensuring you are compliant and able to take full advantage of any benefits and exemptions.We can help you avoid falling foul of complex local rules without having to hire expensive in-house resources on the ground.
With over 10 years of experience, Elite Stag has always been focusing on providing companies with professional one-stop offshore corporate services, covering domestic and foreign company structure consulting, cross-border accounting and tax planning, special permits application, HR outsourcing and Visa services as well as preferential benefits application, etc.
China’s new VAT regulations are good news for SMEs, but add to the complexity of VAT administration and accounting.