Interpretation of Announcement of Tax Exemption Record-filing of Cross-border Taxable Activities and Other Value-added Tax Issues


Date:  2017-10-31    Autor:   WANG, Thomas

Keywords: The same multiple Tax Exemption Record-filing of Cross-border TaxableActivities, freight enterprises, Personal rent invoice, Discounted invoice

In August 14, 2017, the State Administrationof Taxation (“SAT”) released the "Announcement of the State Administration of Taxation on the Tax Exemption Record-filing of Cross-border Taxable Activities and Other Value-added Tax Issues ". In the course of the operation of "Camp to add" pilot, the specific operational problemsof some policies reflected by the parties have been unified and clear in theannouncement. We gather it as follows and enclose our interpretation of these policies:

1.    The same multiple Tax Exemption Record-filing of Cross-border Taxable Activities only need to settle the record-filing formalities for the first time (implemented in September 1, 2017)

The announcement stipulate that taxpayers may not settle the record-filing formalities again provided that they conduct the same cross-border taxable activity upon they have completed the tax exemption record-filing formalities.

Our interpretation:

A lot of time in the daily work of enterprise‘s accountant is actually occupied by the recording-filing activities of various government agencies. The introduction of this document is obviously a burden reduction for accountants.

We point out the problems that should be paid attention to in actual operation.First, we suggest when the enterprises prepare the contract/documents for similar taxable behaviors that may happen many times in the future, they should cover as much number of cross border taxable behaviors as better. Secondly, the taxpayers shall completely retain relevant tax exemption supporting documentsfor future review. To the extent that enterprises fail to furnish the above-mentioned materials during the follow-up administration exercised by the tax authorities, the taxpayers shall not enjoy relevant tax exemption policies.Instead, they shall pay taxes exempted before and be subject to the relevant provisions of the Law of the People's Republic of China on the Administration of Tax Collection.

2.    How does the actual carrier offer the invoice to the logistics enterprise? (implemented in September 1, 2017)

The announcement stipulate that where a taxpayers enters into a transport service contract with a consignor in the capacity of a carrier, makes charges, assumesthe liability of carrier and then entrusts an actual carrier with the task of operating all or partial transport services, the input VAT may be deducted from output VAT provided that it self-purchases refined oil and delivers it to the actual carrier for the purpose of utilization and pays road, bridge and damtolls in compliance with the following requirements at the same time:

1.Where the refined oil and road, bridge and dam tolls shall all be used in the transport services which are entrusted by the taxpayer to the actual carrier;

2.Where the special VAT invoices it obtained conform to exiting provisions.

Our interpretation:

Is it plagued by the actual carrier that who should be stated on the invoice title of all kinds of refined oil, bridge and gate toll? According to this provision,the title of invoice should directly state the consignor’s name and the actual carrier transfer invoices to the consign or for reimbursement would be the better way.

3.    Renting individual housing should require VAT invoices(implemented in September 1, 2017)

The announcement stipulate that where other individuals are required to issue a VAT invoice to the lessee when entrusting a real estate agent or a housing rental company with a task of leasing their real estate, their entrusted entities may apply for issuing a VAT invoice on behalf of such individuals to the competent local taxation authority.

Our interpretation:

After the announcement, the reason like “the house lessor is individual and we cannot achieve invoice” provide by enterprises would obviously unable to convince the tax authorities. Therefore, we strongly suggest that the enterprise review the various types of rent contracts and confirm whether all the VAT invoices have been obtained.

4.    VAT invoices are required for discounting business (implemented in January 1, 2018)

The announcement stipulate that where financial institutions are required to issue an invoice for discount interest when conducting discount or inter-bank discount business, the discounting institutions shall issue an ordinary VAT invoice in full to the applicants for a discount according to note discount interest and the inter-bank discounting institutions shall issue an ordinary VAT invoice in full to the discounting institutions according to inter-bank discount interest.

Our interpretation:

After the announcement, it is clear that the enterprise should achieve both charge list and general VAT invoice for the discount and transfer business. Or, it won’t be allowed to be deducted before enterprise income tax.

If there is any ambiguity in the above announcement, please feel free to contact ECOVIS Ruide professional service team. We will provide the most professional solution and provide our consistent high quality service.


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