May 2017
Announcement of the State Administration of Taxation on Further Clarifications on the Tax Collection and Administration for the Program of Collecting Value-added Taxes in Lieu of Business Taxes(Mainland China)
2017.4.20
James Cheng
The State Administration of Taxation promulgated the Announcement of the State Administration of Taxation on Further Clarifications on the Tax Collection and Administration for the Program of Collecting Value-added Taxes in Lieu of Business Taxes (the "Announcement") on April 20 to specifically address certain tax collection and administration issues in collecting value-added taxes in lieu of business taxes as highlighted below:
I. Subjects governed by the Announcement
The Announcement primarily pertains to taxpayers who provide construction and installation services while selling prefabricated houses, machinery and steel structures; construction enterprises; taxpayers who sell and provide installation services for elevators; taxpayers who provide plant maintenance services; issuing, clearing and acquiring institutions that provide cross-agency clearing services for bank cards; and certain taxpayers involved in the issuance of dedicated invoices for value-added taxes.
II. Major provisions
The Announcement mainly involves two aspects of provisions. The first clarifies the type of taxes for certain services, while the second provides details concerning the issuance of dedicated invoices for value-added taxes.
1. A taxpayer's sale of self-produced goods such as prefabricated houses, machinery and steel structures while also providing construction and installation services do not constitute mixed sales.
2. For a construction enterprise that subcontracts another enterprise within its group to provide construction services after signing a contract with the contract awarding party, the value-added taxes shall be paid based on how the construction services are actually provided.
3. The Interim Measures for the Administration of the Collection of Value-added Taxes on Construction Services Provided by Taxpayers across Counties (Cities or District) do not apply to construction services provided across counties (cities or districts) within the same prefectural administrative region.
4. Where a ordinary taxpayer sells elevator facilities and provides installation services for the same, the taxpayer may choose the simplified tax assessment method for contracting projects where the major equipment, materials and power are supplied by the contracting party. With respect to maintenance services after installation, they shall be subject to value-added taxes under the category of "other modern services."
5. The calculation of the sales amount and the payment of value-added taxes by issuing, clearing and acquiring institutions that provide cross-agency fund clearing services for bank cards are clarified.
6. It is specifically clarified that plant maintenance services are categorized as "other life services."
7. The procedural and statute-of-limitation issues concerning make-up issuance of invoices required for businesses that were subject to business tax prior to May 1, 2016, the application for dedicated value-added tax invoices with a maximum amount not exceeding RMB100,000 in regions where real-name tax processing is implemented, small-scale taxpayers of the value-added taxes for the construction industry, issuance of dedicated value-added tax invoices and invoices for the sale of motor vehicles, issuance of a dedicated tax bill for import value-added taxes, and issuance of value-added tax withholding certificates are clarified.
III. Analysis
Based on the contents of the Announcement in general, they are more fragmented than usual involving multiple issues in the pilot program of collecting value-added taxes in lieu of business taxes. Moreover, they mostly pertain to issues in the details, so taxpayers involved in the pilot program should pay attention to them.
James Cheng
The State Administration of Taxation promulgated the Announcement of the State Administration of Taxation on Further Clarifications on the Tax Collection and Administration for the Program of Collecting Value-added Taxes in Lieu of Business Taxes (the "Announcement") on April 20 to specifically address certain tax collection and administration issues in collecting value-added taxes in lieu of business taxes as highlighted below:
I. Subjects governed by the Announcement
The Announcement primarily pertains to taxpayers who provide construction and installation services while selling prefabricated houses, machinery and steel structures; construction enterprises; taxpayers who sell and provide installation services for elevators; taxpayers who provide plant maintenance services; issuing, clearing and acquiring institutions that provide cross-agency clearing services for bank cards; and certain taxpayers involved in the issuance of dedicated invoices for value-added taxes.
II. Major provisions
The Announcement mainly involves two aspects of provisions. The first clarifies the type of taxes for certain services, while the second provides details concerning the issuance of dedicated invoices for value-added taxes.
1. A taxpayer's sale of self-produced goods such as prefabricated houses, machinery and steel structures while also providing construction and installation services do not constitute mixed sales.
2. For a construction enterprise that subcontracts another enterprise within its group to provide construction services after signing a contract with the contract awarding party, the value-added taxes shall be paid based on how the construction services are actually provided.
3. The Interim Measures for the Administration of the Collection of Value-added Taxes on Construction Services Provided by Taxpayers across Counties (Cities or District) do not apply to construction services provided across counties (cities or districts) within the same prefectural administrative region.
4. Where a ordinary taxpayer sells elevator facilities and provides installation services for the same, the taxpayer may choose the simplified tax assessment method for contracting projects where the major equipment, materials and power are supplied by the contracting party. With respect to maintenance services after installation, they shall be subject to value-added taxes under the category of "other modern services."
5. The calculation of the sales amount and the payment of value-added taxes by issuing, clearing and acquiring institutions that provide cross-agency fund clearing services for bank cards are clarified.
6. It is specifically clarified that plant maintenance services are categorized as "other life services."
7. The procedural and statute-of-limitation issues concerning make-up issuance of invoices required for businesses that were subject to business tax prior to May 1, 2016, the application for dedicated value-added tax invoices with a maximum amount not exceeding RMB100,000 in regions where real-name tax processing is implemented, small-scale taxpayers of the value-added taxes for the construction industry, issuance of dedicated value-added tax invoices and invoices for the sale of motor vehicles, issuance of a dedicated tax bill for import value-added taxes, and issuance of value-added tax withholding certificates are clarified.
III. Analysis
Based on the contents of the Announcement in general, they are more fragmented than usual involving multiple issues in the pilot program of collecting value-added taxes in lieu of business taxes. Moreover, they mostly pertain to issues in the details, so taxpayers involved in the pilot program should pay attention to them.
