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Taxation China Q&A Regarding How Small-Scale Taxpayers Can Apply the Policy of Levying VAT at A Rate of 3% but Reducing It to 1%
FAQQ&A Regarding How Small-Scale Taxpayers Can Apply the Policy of Levying VAT at A Rate of 3% but Reducing It to 1%
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Q： |
The company is a small-scale VAT taxpayer who declares on a monthly basis. It is expected to generate a revenue of 200,000 yuan from the sale of goods in September 2023. What tax reduction and exemption policies can the company enjoy, and how should it issue VAT invoices? |
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A： |
The income obtained from selling goods in September is 200,000 yuan, which can be subject to the policy of levying VAT at a reduced rate of 1% and issuing VAT special invoices or VAT ordinary invoices at a rate of 1%.
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The company is a small-scale VAT taxpayer that declares on a quarterly basis. On August 5, 2023, I issued a VAT special invoice with a collection rate of 3%, which was provided to downstream customers for claiming input tax, but has not yet been declared. Is it necessary to recover the special invoice with the tax rate of 3% that has been issued for this sales revenue in order to enjoy a 1% reduced rate in VAT policy? |
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A： |
Obtaining taxable sales revenue with an applicable 3% tax rate can enjoy the VAT policy of reducing the tax rate to 1%. However, VAT special invoices have the function of deduction. If a VAT special invoice with a 3% tax rate has been issued to the buyer, it should be invalidated after all copies of the VAT special invoice are recovered or issued in red according to regulations before the VAT reduction policy can be applied to this business. Otherwise, it is necessary to declare and pay VAT at a rate of 3% on the taxable sales revenue for which a VAT special invoice has been issued. |
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A small construction company in City A, with construction projects in both City B and City C, is a small-scale taxpayer of VAT declared on a quarterly basis. The expected sales revenue for the third quarter of 2023 is 600,000 yuan, of which 400,000 yuan is for construction projects in B city and 200,000 yuan is for construction projects in C city. How should VAT be paid? |
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The company's sales revenue in the third quarter of 2023 was 600,000 yuan, exceeding 300,000 yuan. Therefore, it cannot enjoy the policy of exempting small-scale taxpayers from VAT. In city A where the institution is located, it can enjoy a reduced VAT collection rate at 1%. The sales revenue of 400,000 yuan achieved in the prepayment of construction services in city B, with a 1% prepayment rate for VAT; The sales revenue of 200,000 yuan achieved in the prepayment of construction services in City C, without the need for prepayment of VAT. |
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On August 25, 2023, a small-scale VAT taxpayer declared on a monthly basis issued a VAT ordinary invoice with a 3% tax rate of 20,000 yuan to the customer. The actual monthly sales revenue in August was 150,000 yuan, all of which were sales revenue at a 3% tax rate. As the customer is an individual, they are unable to recover the issued invoice. Can they still enjoy the policy to reduce collection VAT rate on sales revenue from 3% to 1%? |
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Sales revenue with a 3% tax rate of 150,000 yuan can be directly declared for tax reduction when declaring taxes to enjoy the policy of levying VAT at a 1% tax rate on sales revenue instead of 3% tax rate. There is no need to invalidate or replace the issued VAT ordinary invoice with a 3% tax rate. However, it should be noted that according to relevant regulations such as the Invoice Management Measures of the People's Republic of China, taxpayers should truthfully issue invoices. According to Article 5 of the Announcement of the State Administration of Taxation on Policies Related to the Reduction and Exemption of Value Added Tax for Small scale Taxpayers (No. 1 of 2023), if small scale taxpayers obtain taxable sales revenue and apply the policy of reducing VAT to 1%, they shall issue VAT invoices at a rate of 1%. Therefore, when enjoying the policy of reducing collection VAT rate from 3% on sales revenue to 1%, if a VAT ordinary invoice needs to be issued, it should be issued at a rate of 1%. |
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Small scale taxpayers of VAT for retail motorcycles, with a sales revenue of 200,000 yuan in August 2023, have issued unified invoices for motor vehicle sales with a 3% tax rate to customers. Can they still enjoy the policy to reduce collection VAT rate on sales revenue from 3% to 1%? Is it possible to offset input tax for customers who are general taxpayers of VAT? |
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You can enjoy the policy of reducing collection VAT rate from 3% on sales revenue to 1%. However, due to the deduction function of the unified invoice issued with 3% tax rate for motor vehicle sales, if the customer is a general taxpayer, they can use the issued 3% tax rate unified invoice for motor vehicle sales to claim the corresponding input tax. Therefore, it is necessary to recover the issued unified invoice for motor vehicle sales with a 3% tax rate and reissue with a 1% tax rate to enjoy the tax reduction policy. If it cannot be recovered, VAT needs to be calculated and paid at a 3% tax rate. |
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