How to deal with overdue special invoices for Value-Added Tax (“VAT”)


Date:  2018-01-31    Autor:   ZHU, Bryan

Keywords:Taxation Credit by Overdue Input VAT

In the daily accounting practice, some enterprises often meet the circumstance when the special invoices for VAT, including VAT special invoices and customs importation special VAT payment certificates, have not been verified, confirmed or deducted within the required time limits due to objective reasons. This situation will lead to the outflow of economic benefits from the enterprises. Recently, the State Administration of Taxation made the Announcement of the State Administration of Taxation on Further Optimizing the Procedures for Handling Affairs Related to Value-added Tax and Consumption Tax, which is also called the Announcement of the State Administration of Taxation [2017] No. 36 (hereinafter,"No. 36 announcement"). For the purpose of implementing the requirements of the State Council in respect of streamlining administration,delegating powers and improving regulation and services, it has been optimized for the relevant matters on handling affairs related to value-added tax and consumption tax through the announcement.

1.     The change of the authorizer

In the announcement, the first article clearly stated that "since January 1,2018, the tax deduction for overdue Special invoices for VAT has been approved by the provincial-level SAT offices(formerly: The State Administration of Taxation)".

The interpretation of ECOVIS RUIDE:

The original procedure for the application of overdue VAT deduction is more complicated and needs to be reported step by step. And the procedure only ended after the final approvals made by the State Administration of Taxation. Therefore, we can imagine the time consuming and the uncertainty of the result. Now, according to the contents of the announcement, the right of overdue special invoice for VAT approved by the State General Administration will be delegated to the provincial-level SAT offices, which will greatly reduce the taxpayer's time from application to approval and bring convenience to taxpayers.

2.     The objective reasons are allowed to tax deduction basically unchanged.

Announcement No.36 also stipulated the objective reasons and information submitted to the type of deduction provided. These regulations should be executed in accordance withthe revised "State Administration of Taxation on overdue deduction of Special invoices for VAT issues notice" (the State Administration of Taxation Notice 2011 No. fiftieth, hereinafter referred to as the "Announcement No.50").

According to the Announcement No. 50 of 2011, the objective causes include the following types:

(1) the Special invoices for VAT are overdue because of the force majeure such as natural disasters and social emergencies;

(2) the Special invoices for VAT are overdue as a result of stolen, robbery or loss in transit or delivery errors.

(3) in the process of service or inspection, the Special invoices for VAT overdue caused by the relevant judicial authorities and administrations detain Special invoices for VAT, the taxpayer cannot properly fulfill reporting obligations, or the tax authority information system failed to deal with the taxpayer online authentication data due to the network fault;

(4) the Special invoices for VAT are overdue because the economic disputes between both sides in the business fail to deliver VAT vouchers in time, the tax payers change the tax locations, or the time of canceling the old households and re-handling the tax registration is too long;

(5) the Special invoices for VAT are overdue due to the injury or death, sudden critical illness or quit without permission of the taxation personnel, who fail to handle the transfer procedures;

(6) other circumstances stipulated by the State Administration of Taxation.

The interpretation of ECOVIS RUIDE:

First of all,enterprises shall establish relevant internal management system to prevent the occurrence of such overdue cases. Secondly, once the occurrence of overdue taxneed to deduct (or applied for the State Administration of Taxation, but has not yet been approved), we suggest that the company can compare the information should be reported to the provisions of the content and its annex in the announcement above in order to confirm whether or not the application of overdue input tax deduction. If the conditions are satisfied, the procedure for overdue deductions may be applied after January 1, 2018.

3.    The specific reporting process determined by the provincial-level SAT offices

Announcement No.36 required the provincial-level SAT offices to further refine the process,clear time limit, simplify documents, improve service based on the revised Announcement No. 50 annex "overdue deduction of Special invoices for VAT management measures" (hereinafter referred to as the "management measures"). These policies also should be implemented according to the requirements of streamlining administration, delegating powers and improving regulation and services so as to optimize tax environment, to facilitate the taxpayers and to be beneficial to the tax management on the basis of the relevant provisions and further deepening the tax system reform.

The interpretation of ECOVIS RUIDE:

According to ouropinion, the State Tax Bureau of each province will formulate the relevant tax declaration and approval process according to the request of the No. 36 announcement. If the company does exist in the requirements in this respect, it is suggested to consult the competent tax authorities to acquire the specific declaration process.


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