The Ministry of Finance Circular of the Ministry of Finance Concerning Printing and Distributing the “Rules for the Implementation of the Interim Regulations CaiFaZi [1993] No.38 December 25, 1993 Ministries and directly subordinate institutions of the State Council, people’s governments of various provinces, autonomous regions, “Rules for the Implementation of the Interim Regulations of the People’s Republic of China on Value-added Tax” is now deliver to you, Article 1 The rules are formulated according to the provisions of Article 28 of the Interim Regulations of the People’s Republic of China on Article 2 The term “goods” mentioned in Article 1 of the regulations refers to tangible assets, including electric power, thermal power and The term “processing” mentioned in Article 1 of the regulations refers to goods processed on a commissioned basis, that is, the consignee The term “repairs” mentioned in Article 1 of the regulations refers to the act to restore goods that have been damaged and lost their Article 3 The term “sell goods” mentioned in Article 1 of the regulations refers to the paid transfer of the ownership of goods. The term “provide labor services for processing or repairs” mentioned in Article 1 of the regulations refers to “providing paid labor The term “paid” mentioned in the rules includes money, goods or other economic interests obtained from the buyers. Article 4 The following acts committed by units or individual business people shall be regarded as selling goods: 1. Commission goods to others for selling; 2. Sell goods on a commissioned basis; 3. Taxpayers with more than two organizations in consolidated accounting transfer goods from one organization to another for sales, except 4. Use goods of self-made or processed under commission in non-taxable items; 5. Transfer goods of self-made, processed under commission or purchased from others to other units or individual business people as investment; 6. Distribute goods of self made, processed under commission or purchased from others to stock holders or investors; 7. Use goods of self-made or processed under commission for collective welfare or individual consumption; and 8. Donate to others of goods of self-made, processed under a commission or purchased from others. Article 5 A sale involving both goods and non-taxable labor services is regarded as a mixed sale. A mixed sale made by an enterprise, an enterprising Whether a sale of a taxpayer can be regarded as a mixed sale shall be subject to the determination of tax collecting organs under The term “non-taxable labor services” mentioned in this article refers to labor services in the areas of transportation, construction, “An enterprise, an enterprising unit or an individual business people engaging in production, wholesale or retail sales” mentioned Article 6 A taxpayer engaging concurrently in non-taxable labor services should keep separate accountings on sales of goods, taxable labor services Whether or not the value-added tax shall be levied consolidatedly for a taxpayer concurrently engaging in non-taxable labor services Article 7 “Sell goods ….. within the territory of the People’s Republic of China” as mentioned in Article 1 of the regulations means that “Provide taxable labor services within the territory” mentioned in Article 1 of the regulations means that the labor services are Article 8 “Units” mentioned in Article 1 of the regulations refer to State-owned enterprises, collectively-owned enterprises, private enterprises, “Individuals” mentioned in Article 1 of the regulations refer to individual business people and other individual operators. Article 9 For enterprises leased or contracted out for operation, the person or persons who lease it or the contractor or contractors are the Article 10 If a taxpayer sells goods or taxable labor services in different tax rates and concurrently provides non-taxable labor services which Article 11 The amount of value-added tax returned to buyers due to purchase returns and allowances by taxpayers other than small scale taxpayers Article 12 “Additional expenses” mentioned in Article 6 of the regulations refer to money collected from buyers, including commissions, subsidies, 1. The selling tax amount collected from the buyer; 2. The amount of consumption tax withheld for taxable consumer goods processed on a commissioned basis; and 3. Advance transport charges paid for another if the following requirements are met: (1) The carrying unit provides the invoices for transport charges for the buying party; (2) The taxpayer turns over the invoices to the buying party. All the expenses in addition to prices, irrespective of the methods of accounting, shall be included in the sales volume and taxed Article 13 For mixed sales made concurrently with the provisions of Article 5 and Article 6 of these rules, the sales volume should be the Article 14 If a general taxpayer sells goods or adopts the pricing method of merging sales volume and selling tax amount, the sales volume should Sales volume = Sales volume containing tax/ (1 + Tax rate) Article 15 If a taxpayer settles account of its sales volume in foreign currencies according to the provisions of Article 6 of the regulations, Article 16 If a taxpayer is found to sell goods or provide taxable labor services at prices obviously on the low side without justifiable reasons 1. It shall be determined according to the averaged selling prices of similar goods of the month handled by the taxpayer; 2. It shall be determined according to the averaged selling prices of similar goods in the latest period handled by the taxpayer; 3. It shall be determined according to the composition tax assessment prices. The formula for composition tax assessment price is: Composition tax assessment price = Cost * (1 + cost/ profit rate) If the goods are subject to consumption tax, the composition tax assessment price should include the amount of consumption tax. The cost in the formula refers to the actual production cost for goods produced by the taxpayer itself and to the actual procurement Article 17 The term “buying price” mentioned in item 3 of Article 8 of the regulations includes the prices of the non-taxable services paid The price amount mentioned in the preceding paragraph refers to the price specified on the purchasing document approved for use by Article 18 For mixed sales and concurrent non-taxable labor services that are subject to value-added tax according to the provisions of Article Article 19 The fixed assets mentioned in Article 10 of the regulations include: 1. Machinery, equipment, means of transport and other equipment, instruments and devices associated with production and operations with 2. Articles other than principal equipment for production and operation with an unit value of exceeding RMB2,000 and having been used Article 20 The “non-taxable items” mentioned in Article 10 of the regulations refer to non-taxable labor services, transfer of intangible assets, All the building structures newly built, rebuilt, expanded or repaired or decorated by a taxpayer belong to the fixed assets under Article 21 “Non-normal losses” mentioned in Article 10 of the regulations refer to losses other than normal in the process of production and 1. Losses from natural disasters; 2. Losses from theft and deterioration due to mismanagement; and 3. Other non-normal losses. Article 22 If one of the cases listed in subparagraphs 2 to 6 of Article 10 of the regulations occurs for goods which have been bought in and Article 23 If a taxpayer concurrently engaging in tax-free items or non-taxable items (not including fixed assets under construction) is unable Non-deductible incoming tax amount = All incoming tax amount of the month * Total of the sales amount of the tax-free items and turnover Article 24 The standards for small-scale taxpayers as mentioned in Article 11 of the regulations are: 1. For taxpayers engaging in goods production or providing taxable labor services and taxpayers mainly in goods production or providing 2. For taxpayers engaging in wholesale or retail sales, the annual taxable sales volume is less than RMB 1.8 million. Individuals, non-enterprise units or enterprises not often committing taxable acts whose annual taxable sales volumes exceed the standards Article 25 The sales volume of a small-scale taxpayer does not include its taxed amount. If a small-scale taxpayer adopts the method of pricing by combining sales volume and taxed amount in selling goods or providing taxable Sales volume = Sales volume containing tax/ (1 + Tax rate) Article 26 If a small-scale taxpayer returns the sales volume to the buyers due to purchase returns or allowance, the volume should be deducted Article 27 The reference about “sound accounting system” mentioned in Article 14 of the regulations is the accurate accounting of selling tax Article 28 An individual business people may be acknowledged as a general taxpayer if he meets the requirements listed in Article 14 of the Article 29 A small-scale taxpayer once designated as a general taxpayer is not allowed to turn-back as a small-scale taxpayer. Article 30 The taxed amount should be computed according to the sales volume and value-added tax rate and it is not allowed to set off against 1. The accounting system is not sound or no accurate tax data can be provided; 2. The taxpayer meets the requirements of a general taxpayer but fails to apply for acknowledgment procedures. Article 31 The tax-free items exempted for value-added taxes as mentioned in Article 16 of the regulations are: 1. The term “agriculture” mentioned in subparagraph 1 refers to plant culture, breeding, forestry, animal husbandry and aquatic products. Agriculture producers include units and individuals engaging in agricultural operations. Agricultural products refer to the primary agricultural produce and the scope shall be determined by the tax bureaus directly under 2. “Old and second-hand books” mentioned in subparagraph 3 refer to old books and second-hand books purchased from the society at large. 3. Articles mentioned in subparagraph 8 refer to cruisers, motorcycles and goods other than cars subject to consumption tax. Articles used refer to the articles used by others as mentioned in Article 8 of the rules. Article 32 The starting point for levying value-added tax as mentioned in Article 18 of the regulations applies to individuals only. The starting points for levying value-added tax are as follows: 1. For selling goods, a monthly sales volume in the range of RMB 600-2,000; 2. For providing taxable labor services, a monthly sales volume in the range of RMB 200-800; 3. For paying taxes by installments, each sales volume (day) in the range of RMB 50-80. Sales volume mentioned in the preceding paragraphs refers to the sales volume of small-scale taxpayers as mentioned in Paragraph 1 The tax bureaus directly under the State Administration of Taxation should fix the starting points for levying value-added tax for Article 33 The time for tax obligations in selling goods or taxable labor services as provided for in subparagraph 1 of Article 19 of the regulations 1. For cases of selling goods with direct payment, no matter whether the goods are dispatched or not, the time is set at the very day 2. For cases of entrusting receipt of payment to others or banks, the time is set at the very day when the goods are sent and collection 3. For cases of credit or installment sale, the time is set at the day as agreed by contracts; 4. For cases of advance payment, the time is set at the day when the goods are dispatched; 5. For cases of consignment sales, the time is set at the day when the consignment purchase list is received; 6. For cases of providing taxable labor services, the time is set at the day when payment or document for payment is received; 7. For cases of sales as listed in subparagraphs 3 to 8 of Article 4 of the rules, the time is set at the day when the goods change Article 34 For sales of taxable labor services made within the territory of China by a unit or individual outside China of no operating organizations Article 35 If a household of no fixed operation sells goods or taxable labor services in places other than its residence and fails to file tax Article 36 Tax authorities mentioned in Article 20 of the regulations refer to the State Administration of Taxation and tax collecting agencies The tax authorities in charge or tax collecting agents mentioned in the rules refer to the tax agencies above the level of the tax Article 37 The terms “less than” or “more than” mentioned in the rules all include the base figures. Article 38 The rules shall be interpreted by the Ministry of Finance or by the State Administration of Taxation. Article 39 The rules shall enter into force as of the date of the promulgation of the regulations. The Rules for the Implementation of the Regulations |
The Ministry of Finance
1993-12-25