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  • Author Date Time:2010-03-25 01:04:17

    Why is VAT general taxpayer status important?

    VAT payers in China are separated into two different categories – general taxpayers and the small-scale taxpayers – and the VAT rates vary for different statuses. While the rate for general taxpayers stands at 17 percent in most cases and 13 percent on imports of several specific goods, the rate for small-scale taxpayers is only 3 percent.


    Although the VAT rate for small-scale taxpayers is much lower, obtaining the general taxpayer status is still essential and beneficial for companies with considerable annual business turnover, because the status will:


    1, Allow companies to deduct the input VAT from output VAT

    2, increasing companies’ range of potential clientele as well as credibility by allowing them to issue VAT receipts (folios).


    2. How do you qualify to be a VAT general taxpayer?

    To qualify to be a VAT general taxpayer, a company must pass the relevant estimated annual taxable turnover threshold, meet stipulated requirements, and meet “soft” unwritten requirements.


    Pass the relevant estimated annual taxable turnover threshold

    1,To qualify as a VAT general taxpayer, manufacturing enterprises (those engaged or mainly engaged in goods production or taxable service provision) must have an estimated annual taxable turnover exceeding RMB500,000.


    2, Other types of enterprises (with at least 50 percent of income from wholesale or retail of goods) require an estimated annual taxable turnover exceeding RMB800,000.


    Meet stipulated requirements

    1,The State Administration of Taxation (SAT) document “The Management Method of VAT General Taxpayer Qualification Verification (SAT Decree 2),” stipulates that all applicants for general taxpayer status have to meet the following conditions to have their applications proceeding:


    1.1, Have fixed premises of production and operation

    1.2, Be able to conduct accounting as stipulated by the state


    Meet “soft” unwritten requirements

    In addition to the official written requirements, additional “soft” unwritten requirements are also commonly found to influence the local tax authority’s judgment on whether or not an applicant is eligible for general taxpayer status. These include:


    1, Office size/number of employees

    2, Warehouse (and warehouse location)

    3, Registered capital


    Compass Consulting Limited can process the whole process to apply the General Taxpayer to our clients. For further information, please contact us.



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