The identification of normal VAT tax payer
When
starting a new business, the enterprise which meets the requirements should make the application The state tax authority will exam the related documents within 30 days and confirm the VAT normal taxpayer with special badge
Normal taxpayer
Annual sales – over the criteria of small scale taxpayers Sound financial accounting system dividuals which the annual sales exceeds the small-scale taxpayers, could not be normal taxpayer, and Enterprises which seldom have taxable goods and services could choose to be small-scale taxpayers
VAT Taxable Items and Rates
Coverage of collection rate Exportation of goods (except those prohibited from 0 exportation and restriction from importation by the state) (1) Cereals, edible vegetable oils (2) Tap water, heating, cooling, hot water, gas, LPG （Liquefied Petroleum Gas ）, natural gas, methane gas, coal/charcoal products for household use; (3) Books, newspapers, magazines; (4) Feed, chemical fertilizer, chemical pesticides, agricultural machinery, and farm-use plastic sheets; other goods and taxable services.
7.1 Definition of value added tax
VAT
is a tax on turnover, not on income VAT is considered neutral as compared with general sales tax
7.1 Definition of value added tax
Small-scale taxpayer
enterprises – the annual sales less than 0.5 million Yuan Commercial enterprises – the annual sales is less than 0.8 million
Industrial
Example of VAT computation
Firm
Sales VAT goods price Output Input (no tax) tax tax Wheat Flour Cake Cake 100 200 800 1000 0 26 136 170 0 13 26 136
Tax payable 0 13 110 34
The
Two types of VAT tax payers
Normal
taxpayer Small-scale taxpayer Criteria for classification:
Annual
taxable sales value Financial accounting system
7.3 Value-Added Tax in China
The
overview of VAT in China The design of VAT
Who
The
pays VAT Taxable items and tax rates
reform of VAT in China
The overview of VAT in China

Mixed sale
A sale activity involves both good and nontaxable labor services . Tax treatment: The mixed sale in goods manufacturing, wholesaling and retailing are deemed as sales of goods – VAT on total sales revenue Other mixed sales – business tax

A value added tax (VAT) is a form of consumption tax.
From
the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the value added to a product, material, or service.
7.1 Definition of value added tax
The
VAT system is based on tax collection in a staged process, with successive businesses entitled to deduct input tax on purchases and account for output tax on sales This ensure the neutrality of the tax
Chapter 7 Value added tax
Chapter 7 Value added tax
Definition of value added tax The development of VAT VAT in China Some issues of VAT

7.1 Definition of value added tax

By the method of collection, VAT can be accounts-based or invoice-based
Invoice method of collection



Each seller charges VAT rate on his output and passes the buyer a special invoice that indicates the amount of tax charged. Buyers who are subject to VAT on their own sales (output tax), consider the tax on the purchase invoices as input tax and can deduct the sum from their own VAT liability. The difference between output tax and input tax is paid to the government (or a refund is claimed, in the case of negative liability)
13%
17%
VAT taxpayers
leaseholders or the contractors – in case of business leased or contracted to others Agents or purchasers – for overseas units or individual sell taxable goods and services in China

VAT—who should pay ? Any enterprise, administration unit, institutional unit, military unit, social organization, individual engaged in: The sales of goods Goods refer to tangible movable objects, including electricity, heat and gas The importation of goods The provision of processing, repairs and replacement services (taxable services)
Introduced
in Jan.1, 1994 The biggest tax in China Administered by the Offices of SAT (State Administration of Taxation) Shared tax between central and local government
Some activities are deemed as sales of goods
Pass goods to others for sale on behalf Sell goods on commission basis Use self-manufactured or processed or purchased as investment, by distributing the goods to shareholders, investors or by donating to others with no charge Use self-manufactured or processed as nontaxable items, collective welfare for private consumption.