The State Taxation Administration of China announced a Notice on Taxation Credit Administration on 13 September 2020, which introduced four measures to optimize taxation credit management and would come into force from 1st November 2020. The new policy will loosen the evaluation criteria of taxation credit by implementing following measures, which will help the taxpayers to accumulate credit assets as well as to promote tax compliance and optimize the business environment.

1. Non-independent branches can participate in taxation credit evaluation voluntarily
   
   Non-independent branches mentioned in the Notice mean the branches that established by enterprise taxpayers and finished tax registration based on non-independent accounting method. As a department that affiliated to an enterprise with independent accounting method, non-independent branch did not take part in the taxation credit evaluation before. According to the Notice, non-independent branches can participate in taxation credit evaluation voluntarily by submitting Taxation Credit Evaluation Form based on their own situations.
   
    After participating in the evaluation, non-independent branch’s taxation credit shall not be evaluated by tax authorities for the year before 2019. Non-independent branches shall comply with the regulations of the State Taxation Administration during the period of existence.
   
   
2. Adjust the rules of starting score of taxation credit evaluation
   
   According to the Notice, tax authorities shall adjust the starting score rules in 2020 taxation credit evaluation. If enterprises have nonrecurrent index information in tax system in recent 3 years, the taxation credit evaluation score will start from 100; If not, the score will start from 90.
   
   * Nonrecurrent index means taxpayers have records of taxation appraisal, big business audit, anti-tax-avoidance investigation, taxation survey that organized by tax authorities.
   
   
3. Adjust the rules of remaining D grade in taxation credit evaluation
   
   

   (1)	Tax authorities will adjust management measures for D grade taxpayers from 2019 taxation credit evaluation. For D grade taxpayers who was assessed based on the evaluation indexes, their score will be deducted 11 points instead of remaining D grade directly in the next year.  In line with aforementioned adjustments, enterprises who get D grade based on the low index score will not be assessed as D anymore if they improve tax compliance situation in the next year, score deductio will be performed instead of remaining D grade for 2 years, this will encourage taxpayers to improve their credit status actively.
   (2)	For enterprises who remained D grade in 2019 taxation evaluation, tax authorities shall adjust their 2019 grade before 30 November 2020 according to the Notice. No retroactive adjustments shall be made for taxpayer’s taxation credit grade before the year of 2019 so that helps to support the enterprises to improve their taxation credit status.
   (3)	Tax authorities will remain D grade evaluation for two years if taxpayers get D grade from direct assessment. Furthermore, these taxpayers shall not get A grade in taxation credit evaluation for the third year.

   
   
4. Review the index evaluation
   
   Review the taxation credit index evaluation is required in the Notice. Before the release of taxation credit evaluation results, taxpayers can submit a review application by filling in reassessment forms in March in the next year of the evaluation if they have objections to the index evaluation result. Competent tax authorities will make necessary adjustments when make final decision on the annual evaluation results, as well as release the results in time and provide inquiry services for the reassessment status.
   

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