The announcement is hereby made on policies for the further refund of end-of-period VAT credits, which I offer the full announcement in the attachment for your reference. Since the announcement is complicated, I summarize the key contents for your better understanding:
Core policy:
Small and micro enterprises in all industries and large and medium-sized enterprises in 6 industries, such as manufacturing, will be refunded with the existing VAT credits in a one-off manner and the incremental tax credits on a monthly basis.
Industries such as manufacturing: including "Manufacturing", "Scientific research and technology services", "Electricity, Heat, gas and water production and supply", "software and information technology services", "ecological protection and environmental management" and "Transportation, Storage and postal services"
The judgment standards applicable herein to small and micro enterprises and manufacturing industries that most of our clients may belong to are listed in the attachment.
Time schedule:
Refund of incremental VAT credits:
All enterprises included in this preferential scheme can start to apply for refund of incremental VAT credits during the April declaration period.
Refund of existing VAT credits:
- For small and micro enterprise: Micro enterprises can apply for refund during the April declaration period while small enterprises can apply for refund during the May declaration period; Tax authority will push the realization of refund to micro enterprise before 30th April 2022 and to small enterprises before 30th June 2022.
- For large and medium-sized enterprises in aforementioned 6 industries: medium-sized enterprises can apply during the May declaration period while large-sized enterprises can apply during the October period. Tax authority will push the realization of refund to medium enterprises before 30th June 2022.
Calculation of existing VAT credits and incremental VAT credits
- Existing VAT credit
The base is the VAT credits at the time when the VAT retention tax rebate policy officially takes effect -- March 31, 2019.
The calculation formula of the refundable credit is: Existing VAT refunds = retained VAT credits (existing) * proportion of input VAT
If the taxpayer has not received a VAT credit before, and the ending VAT credit as of current month is not less than the amount as of March 31, 2019, the existing VAT credit is the amount as of March 31, 2019.
If the ending VAT credit as of current month is less than the end VAT credit as of March 31, 2019, that means that a portion of the base at date of March 31, 2019 has been deducted at a later date. The existing VAT credit is the ending VAT credit as of current month.
After a taxpayer obtains a lump-sum refund of existing tax credit, its existing tax credit will be zero.
- Incremental VAT credits
In essence, it refers to the increase after comparing with the VAT credits as of March 31, 2019.
The calculation formula of the refundable credit is: Incremental VAT refunds = retained tax credits (increment) * proportion of input VAT
Before the taxpayer gets the refund of existing VAT credit, the incremental VAT credit = the current VAT credit - the VAT credit at the end of March 2019. A positive value indicates that the incremental VAT credit is refundable; if less than 0, it indicates that there is no incremental VAT credit.
After a taxpayer obtains a lump sum refund of existing VAT credits, the incremental VAT credit shall be the VAT credit at the end of the current period.
- Proportion of input VAT
It shall mean the ratio of VAT amount indicated on special VAT invoices (including fully digitized electronic invoices bearing the wording "Special VAT Invoices" and standard tax control invoices for sale of motor vehicles), plain VAT electronic invoices for highway tolls, special Customs payment notices for import VAT, and tax payment receipts which have been credited from April 2019 to the tax period prior to the application for tax refund, to the total credited input VAT in the same period.