Shenzhen Issues FAQs on Tax Exemption Policy for Small and Micro-Sized Enterprises

August 12, 2013 Posted by China Briefing Reading Time: 4 minutes

Aug. 12 – China Released the “Circular on Temporary Exemption of Value-added Tax (VAT) and Business Tax (BT) for Certain Small and Micro-Sized Enterprises (caishui [2013] No.52, hereinafter referred to as the ‘Circular’)” on July 29, which stipulates that certain small-scale VAT taxpayers and BT taxpayers with monthly sales amounts not exceeding RMB20,000 may be temporarily exempted from VAT and BT starting from August 1, 2013.

To better implement the Circular, Shenzhen’s Municipal Tax Bureau recently released a set of frequently asked questions regarding the tax exemption policy. Detailed information can be found below.

Q: Should taxpayers file an application for the tax exemption policy?

A: Taxpayers do not need to file an application for the tax exemption policy. Qualified taxpayers can enjoy the tax breaks on a monthly basis after filing the Quarterly Value-added Tax Declaration Form.

Q: Does the term “not exceeding RMB20,000” include RMB20,000? Does the tax exemption policy cover individual businesses with monthly sales amounts of not more than RMB20,000?

A: Certain VAT taxpayers and BT taxpayers with monthly sales amounts not exceeding RMB20,000 can enjoy the tax exemption policy. However, the Circular provides that this policy only applies to enterprises and entities of non-enterprise nature, meaning that individual businesses are not covered.

Q: Should small-scale VAT taxpayers and BT taxpayers with monthly sales not exceeding RMB20,000 be subject to the classification standards under the Circular on Classification Standards of Small and Medium-Sized Enterprises?

A: As long as the taxpayers are VAT taxpayers and BT taxpayers (enterprises and entities of non-enterprise nature) with monthly sales not exceeding RMB20,000, they can enjoy the tax exemption policy. No other requirements have been imposed upon such entities.

Q: Should qualified small and micro-sized enterprises pay taxes in advance when applying for the issuance of invoices with amounts less than RMB20,000?

A: When small-scale taxpayers (enterprises and entities of non-enterprise nature) apply for the issuance of ordinary invoices with a tax authority, the amount of a single business transaction shall be over RMB20,000. For enterprises with monthly sales amounts over RMB20,000, tax authorities shall issue special VAT invoices on their behalf based on the relevant regulations.

Q: Should enterprises go through the tax filing procedures for the tax exemption policy?

A: No tax filing procedures are required.

Q: Which is the tax calculation base for small-scale VAT taxpayers with monthly sales amounts at RMB30,000 (excluding taxes) – RMB30,000 or RMB10,000?

A: For small-scale VAT taxpayers with monthly sales amounts over RMB20,000 (excluding taxes), their taxes shall be calculated based on their total sales revenue. Therefore, the tax calculation basis for small-scale VAT taxpayers with monthly sales of RMB30,000 shall be RMB30,000.

Q: Can tax authorities issue special VAT invoices (including special VAT invoices for freight transportation) for small-scale taxpayers with monthly sales amounts not exceeding RMB20,000?

A: Tax authorities cannot issue invoices on behalf of small-scale taxpayers with monthly sales not exceeding RMB20,000. However, tax authorities can issue special VAT on behalf of such entities if they have waived their right to claim the tax exemption; and such taxpayers are not allowed to apply for tax exemption within 36 months after the waiver of tax exemption.

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