For the general VAT taxpayers engaged in taxable behavior, in addition to the following low tax, tax exemption, etc., are applied to the basic rate of 17%, and for cigarettes, alcohol, luxury goods, and other special goods through the imposition of excise tax to regulate the burden of taxation.
Low tax rate
In order to reduce the tax burden of certain industries, in addition to the basic tax rate, a low tax rate of 13% has been stipulated. Goods subject to the low tax rate include: agricultural products; heating, cooling, hot water, gas, liquefied petroleum gas, natural gas, biogas, coal products for residential use; books, newspapers, magazines; feedstuffs, chemical fertilizers, pesticides, agricultural machinery (excluding parts and components of agricultural machinery); agricultural films; metal and non-metallic minerals; and agricultural films. Agricultural films; metal and non-metallic mineral extraction products and other goods prescribed by the State Council. General VAT payers selling or importing the above goods are subject to VAT at the low rate of 13%.
Levy Rate
The levy rate for small-scale taxpayers is 4% for commercial small-scale taxpayers and 6% for industrial small-scale taxpayers, and neither of them is allowed to deduct input tax.
In addition, according to the Ministry of Finance, Cai Shui [2002] No. 29, "Notice on Value-added Tax Policy on Used Goods and Used Motor Vehicles", since January 1, 2002, the taxpayers (regardless of whether they are general VAT taxpayers or small-sized taxpayers) selling used goods are subject to a 4% levy rate and then half of the VAT, and are not allowed to deduct the input tax. Taxpayers selling their used motor vehicles, motorcycles and yachts subject to consumption tax shall calculate the tax amount at the rate of 4% and then reduce the value-added tax by half if the selling price exceeds the original value; if the selling price does not exceed the original value, it shall be exempted from value-added tax. The sales of old motor vehicles, motorcycles and yachts by old motor vehicle business units shall be subject to a 4% levy rate and then a 50% reduction in VAT.
For the sale of tap water by water companies, according to the State Administration of Taxation on May 17, 2002, State Taxation [2002] No. 56 "Notice on VAT Policy Issues in the Water Industry", VAT is also levied at the rate of 6%, but at the same time, the VAT stated in the VAT invoices for tap water purchased from water plants can be deducted.
Crude oil and natural gas extracted from oil (gas) fields under Sino-foreign cooperation are subject to VAT at a rate of 5% according to the State Council's Circular No. 10 of February 22, 1994 on Issues Relating to the Application of Provisional Regulations on Taxes on Value-added Taxes, Consumption Taxes and Business Taxes by Foreign-invested Enterprises and Foreign Enterprises.
Tax Exemptions and Deductions
Article 16 of the Provisional Regulations of the People's Republic of China on Value-added Tax (VAT) exempts the following eight items from VAT:
Agricultural products of self-production sold by agricultural producers
Contraceptive medicines and paraphernalia
Antiquarian and antiquarian books
Accessories imported for direct use in scientific research, scientific experiments and teaching, equipment
Imported materials and equipment provided by foreign governments and international organizations for free assistance
Equipment imported for processing with supplied materials, assembling with supplied parts, and compensatory trade
Items imported directly by disabled persons' organizations for the exclusive use of disabled persons
Sales of self-used items
In addition, those that do not meet the starting point shall be exempted from VAT, and the right to reduce and exempt VAT shall be vested in the State Council. The right to reduce or exempt VAT rests with the State Council, and no region or department has the right to reduce or exempt VAT, but the provincial tax bureaus may determine the applicable starting point within the prescribed range according to the local actual situation.
In addition to the above statutory exemptions, the Ministry of Finance, the State Administration of Taxation and other ministries and commissions, with the approval of the State Council, have issued a number of new exemptions and exemptions one after another, including the following:
Prefabricated components manufactured on the construction site by processing factories and workshops attached to infrastructures and enterprises engaged in the business of construction and installation are not subject to value-added tax where they are directly used in the construction work of the unit or the enterprise
Value-added tax is not levied on the transfer of copyrights.
Sales of movie masters, videotape masters and audio cassette masters occurring as a result of the transfer of copyrights and sales of computer software occurring as a result of the transfer of ownership of patented and non-patented technologies are not subject to value-added tax
Computer software products registered by the State Copyright Administration are subject to business tax, not value-added tax, if the copyrights and ownerships are transferred at the time of the sales
Where computer software products registered by the State Copyright Administration are sold, business tax, not value-added tax, is imposed.
No VAT is levied on the supply or exploitation of unprocessed natural water, such as reservoirs supplying water for agricultural irrigation and factories extracting their own groundwater for production
No VAT is levied on the income from sales of telephone directories by the telecommunication department and its subordinate telephone directory companies
Military supplies sold to the army and armed police are exempted from VAT
The army and armed police VAT exemption for steel, timber, cement, boilers and other goods produced by enterprises belonging to the system and transferred or sold within the system
VAT exemption for special equipment, instruments and meters and their spare parts imported by units of the army, the armed police and the military-industrial system with the approval of the General Logistics Department and the National Defense Science and Industry Commission
VAT exemption for import of canines imported by the army, the armed police and the public security departments
Value-added tax exemption for supplies for the disabled
Value-added tax exemption for processing, repair and fitting services provided by the disabled
Value-added tax exemption for imported articles intended for the exclusive use of disabled persons
Value-added tax exemption for building materials produced by the use of waste slag
Value-added tax exemption for imported scientific research books and journals sold to scientific research institutes and colleges and universities by China Books Import and Export Corporation (CBIEC), Teaching books and periodicals are exempted from value-added tax
Maintenance fees for rural power grids collected by rural power stations are exempted from value-added tax
Agricultural production materials such as agricultural films, seeds, seedlings, fertilizers, pesticides, agricultural machinery, and so on are exempted from value-added tax
Imported fertilizers and pesticides imported within the national plan are exempted from import value-added tax
Sales of grain by state-owned grain enterprises with the mission of collecting and storing grain are exempted from value-added tax. As well as other grain enterprises selling military grain, disaster relief grain, grain for reservoir immigrants and edible vegetable oil in government reserves, they are exempted from value-added tax
Clinical blood supplied by blood stations to medical institutions is exempted from value-added tax
Value-added tax is exempted on preparations produced by nonprofit medical institutions for their own use, while preparations produced by for-profit medical institutions for their own use are exempted from value-added tax for 3 years
Gold allotted by the People's Bank at international market prices is exempted from value-added tax
Sales of gold (excluding gold with the color of AU9999, AU9995, AU999, AU995; and standard gold with the specifications of 50 grams, 100 grams, 1 kilogram, 3 kilograms, and 12.5 kilograms) and gold ore (including associated gold) by the gold production and sales units are exempted from value-added tax
Gold exchange member units through the gold exchange sales of standard gold, did not occur in the physical delivery of value-added tax exemption; occur in the physical delivery, by the tax authorities in accordance with the actual transaction price on behalf of the VAT invoice, and the implementation of the VAT that is returned to the policy, and at the same time exempted from urban maintenance and construction tax, education surcharges
On the import of gold (including standard gold) and gold ores (including associated minerals), the VAT exemption on imports
Diamonds traded on the Shanghai Diamond Exchange are exempted from VAT, while diamonds sold to the domestic market are not exempted
No VAT will be levied on imported diamonds directly entering the Shanghai Diamond Exchange at the import stage
College logistic entities provide the canteens of teachers and students of colleges and universities with grains, edible vegetable oils, vegetables, meat, poultry, eggs, condiments and canteen cutlery.
The income from exporting fast food provided by logistics entities of universities to other universities is exempted from VAT
Taxable products (excluding consumption tax taxable products) produced by university-run enterprises for the purpose of teaching and scientific research in the university are exempted from VAT
The four asset management companies approved by the State Council, namely, China Cinda, Huarong, the Great Wall and Dongfang, and their branches, accept the VAT on the relevant products and services
The four asset management companies approved by the State Council, including China Cinda, Huarong, the Great Wall and Dongfang, accept the VAT on the import of diamonds. The four asset management companies approved by the State Council, including China Cinda, Huarong, Great Wall and Dongfang, and their branches, accept the non-performing claims of the relevant state-owned banks, and the borrowers offset the principal and interest of the loans with goods, real estate, intangible assets, securities and bills, etc., and are exempted from VAT on the sales and transfer of such goods, real estate, intangible assets, securities and bills, as well as from VAT on the use of such goods and real estate to engage in the financial leasing business
The repair of wagons by the internal units in the railroad system for the system is exempted from VAT. The business of repairing wagons within the railway system is exempted from value-added tax (VAT)
Value-added tax (VAT) is exempted on the sale of waste materials acquired by waste materials recycling units
VAT is exempted on the goods procured domestically by the foreign governments and international organizations with free assistance
The official supplies brought in by the embassies or consulates in China, the goods for personal use of the diplomatic representatives, and the items for settling down by the administrative and technical staff of embassies or consulates within half a year of arrival are exempted from VAT. Import VAT exemption for household goods brought in by diplomatic representatives and administrative and technical staff of embassies and consulates within six months of their arrival
VAT exemption for ship repairing business of COSCO Group
VAT exemption for sports equipment imported by the national professional sports teams, or sports equipment and special clothing for competitions donated and sponsored by international organizations and foreign countries
VAT exemption for the 29th Olympic Games organizing committee on the re-sale of the donated goods and the revenues derived from assets transferred after the Games
VAT exemption for the income from re-sale of donated goods and assets transferred after the Games
Exemption of import VAT and customs duty on imported materials gratuitously donated by foreign governments and international organizations for use in the 29th Olympic Games
Exemption of import VAT and customs duty on non-tradable documents, books, audio-visuals and CD-ROMs imported by mail from abroad by the International Olympic Committee (IOC), international sports organizations, and other social organizations, etc., related to the 29th Olympic Games, which do not flow into the domestic market, to the extent of the quantity reasonably required
Exemption of import VAT on imported documents, books, audio-visuals, and CD-ROMs. Within the scope of reasonable quantity, they shall be exempted from value-added tax and customs duty at the import stage. Non-tradable planning and design plans such as models, drawings, drawing boards, CD-ROMs of electronic documents, design instructions and thumbnails, etc., imported for the construction of the Olympic venues shall be exempted from import-related value-added tax and customs duty
The equipments required for the construction of stadiums for the 29th Olympic Games which are fixed and inseparable from the facilities of the stadiums and consumables (e.g. balls for competition) imported in the form of general trade and used for the Games shall be exempted from import-related value-added tax and customs duty within reasonable quantities. Consumables (e.g. match balls, etc.) imported under general trade shall be exempted from import VAT and customs duty
The IOC shall be exempted from tax on the income derived from the territory of China in connection with the 29th Olympic Games, as well as the compensation income and the share of income paid by the Organizing Committee in accordance with the provisions of the relevant agreements and contracts
The processing and production of rail sleepers and precast cement structures for the construction of the Qinghai-Tibet Railway by the processing and production enterprises that have been awarded the tender shall be exempted from the tax.
VAT exemption for the income from the sale of SARS donations by government-organized auctions or designated agencies
VAT exemption for imported relief materials such as foodstuffs, medicines, necessities of life and salvage tools donated by foreign groups, enterprises and individuals
VAT exemption for the value-added tax on the production and sale of urea products produced and sold by domestic enterprises. Adjusted from 50% levy and then return to temporary exemption of VAT
Import VAT exemption for commodities imported by border residents in border areas through the mutual trade with a daily value of less than RMB 1,000 per person
Import VAT exemption for self-caught aquatic products and their processed products that are caught on the high seas or in foreign waters by fishing vessels of distant-water fisheries enterprises and transported back to the country for domestic sale
Imported aircraft (including leased aircraft) imported by airlines directly under the Civil Aviation Administration of China and local airlines during the Ninth Five-Year Plan period will be subject to a 6% reduction in import VAT
The use of coal ore, coal cinders, oily shale, and wind power production of electric power, as well as some of the state-listed new wall materials, will be subject to a 50% reduction in the value-added tax
The above list of exemptions and exemptions is only a part of the project and not all of it.
The above list is only part of the exemptions but not all of them.