China Releases Circular on Import Value-Added Tax Deduction

June 28, 2013 Posted by China Briefing Reading Time: 4 minutes

Jun. 28 – China’s State Administration of Taxation and the General Administration of Customs jointly released the “Circular on Relevant Issues Regarding the Administration of the ‘Comparison Prior to Deduction’ Policy Applicable to Value-added Tax Creditable Special Customs Receipts (SAT Order No. 31, hereinafter referred to as the ‘Circular’),” which expands the “Comparison Prior to Deduction” pilot project nationwide from July 1, 2013. Detailed information can be found below.

“Comparison Prior to Deduction” Policy
The Circular provides that, starting from July 1, 2013, the value-added tax (VAT) creditable special customs receipt for imports (hereinafter referred to as “Customs Receipt”) obtained by a VAT general taxpayer (hereinafter referred to as “taxpayer”) shall be verified by the tax authorities before it can be used to offset output VAT.

Moreover, where a taxpayer receives a Customs Receipt, it shall submit the Deduction List of Customs Duty-Paid Vouchers (Electronic Data) to the competent tax authority and apply for the verification within 180 days after the issuance of the Customs Receipt. If the taxpayer misses the 180-day deadline, no input tax credit shall be allowed.

Verification Results
The verification results can be divided into the following five categories:

Consistent
Inconsistent
Incomplete
Repeated invoice numbers
Continued verification

Handling Procedures
Where the verification result is “consistent,” the taxpayer shall apply for a deduction within the declared period of the month in which the tax authority issues the verification result, and input tax deduction shall not be allowed if the taxpayer fails to apply within the designated time-frame.

Where the verification result is “inconsistent” or “incomplete,” the taxpayer shall submit the original Customs Receipt to the competent tax authority and apply for data verification or revision within 180 days after the issuance of the result. Input tax deductions shall not be allowed if the taxpayer fails to apply within the designated time-frame.

If the inconsistency is caused by data collecting errors, verification shall be conducted again after relevant data has been fixed.
If the inconsistency is not caused by data collecting errors, the taxpayer may apply for data verification again with the competent tax authority.
Where the information indicated on the Customs Receipt is consistent with the actual import business of the taxpayer upon verification, the taxpayer shall apply for deduction within the declared period in the following month after receiving the written notice from the tax authority, and input tax deduction shall not be allowed if the taxpayer fails to apply within the designated time-frame.

Where the verification result is “repeated invoice numbers,” the competent tax authority shall further verify the relevant data, and if the information indicated on the Customs Receipt is consistent with the actual import business of the taxpayer upon verification, the taxpayer shall apply for deduction within the declared period in the following month after receiving the written notice from the tax authority, and input tax deduction shall not be allowed if the taxpayer fails to apply within the designated time-frame.

Where the verification result is “continued verification,” the Customs Receipt shall undergo continued verification, and re-application for data verification is not required.

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