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Q&A Regarding on how to pay value-added tax for labor dispatch services in China

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Q: What is labor dispatch service?
A: Labor dispatch service refers to the service provided by a labor dispatch company to meet the flexible employment needs of the employing unit by dispatching employees to the employing unit, accepting the management of the employing unit, and working for them.

Q: How do general taxpayers pay value-added tax for providing labor dispatch services?
A: Value added tax shall be calculated and paid according to the general tax calculation method based on the total price and additional expenses obtained as the sales amount; You can also choose to pay the difference tax, deducting the wages, benefits, and social insurance and housing provident fund paid by the proxy labor unit to the dispatched workers from the total price and additional expenses obtained, as the sales amount, and calculate and pay value-added tax at a rate of 5% according to the simplified tax calculation method.

Q: How do small-scale taxpayers pay value-added tax for providing labor dispatch services?
A: Value added tax is calculated and paid at a rate of 3% using the simplified tax calculation method based on the total price and additional expenses obtained as the sales amount; You can also choose to pay the difference tax, deducting the wages, benefits, and social insurance and housing provident fund paid by the proxy labor unit to the dispatched workers from the total price and additional expenses obtained, as the sales amount, and calculate and pay value-added tax at a rate of 5% according to the simplified tax calculation method.

Q: How to issue invoices to taxpayers who choose to pay differential taxes and collect fees from employers for paying wages, benefits, and handling social insurance and housing provident fund for dispatched workers?
A: Taxpayers who choose to pay differential taxes and collect fees from the employing unit for paying wages, benefits, and handling social insurance and housing provident fund for dispatched workers are not allowed to issue value-added tax special invoices, but can issue ordinary invoices.

Q: What are the policy basis for the relevant regulations on how to pay value-added tax for labor dispatch services?
A: According to the "Notice of the Ministry of Finance and the State Administration of Taxation on Further Clarifying the Policies Related to Labor Dispatch Services and Toll Road Toll Deduction for the Comprehensive Promotion of the Pilot Program of Replacing Business Tax with Value added Tax" (Caishui [2016] No. 47) and the "Notice of the Ministry of Finance and the State Administration of Taxation on the Comprehensive Promotion of the Pilot Program of Replacing Business Tax with Value added Tax" (Caishui [2016] No. 36).

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