From April 1st: Reduced Tax declaration periods for Small-Scale & Low Profit Taxpayers

The State Administration of Taxation (SAT) Announcement No. 6 of 2016 on “Reasonably Reducing the Tax Declaration Times for Taxpayers ” defined that small-scale VAT taxpayers as well as small-scale enterprises shall only make quarterly payments of VAT starting from 1 April 2016 instead of the previous method of declaring VAT on monthly basis instead.  Enterprise income tax (EIT) shall be continued to be prepaid every quarter.

(A) A small-scale taxpayer of VAT shall declare VAT every quarter.

Small-scale here refers to:

• Taxpayers engaged in the production of goods or in the provision of taxable services, and such taxpayers engaged mainly in the production of goods or the provision of taxable services or in the wholesale or retail of goods, with the annual sales amount subject to value-added tax being less than CNY 500,000.
• Taxpayers other than those specified in point 1 with an annual taxable sales amount being less than CNY 800,000.
• General VAT taxpayers with an annual taxable sales less than CNY 5,000,000, whose accounting system is incomplete or who cannot provide accurate tax information.

According to the announcement, the value-added tax, consumption tax, cultural undertaking construction fee, urban maintenance and construction tax, and educational surtax paid by small-scale taxpayers shall be declared on a quarterly basis, in principle. In order to meet the requirements of different taxpayers, for those taxpayers who request not to make tax declarations on a quarterly basis, the tax authority shall determine the tax payment date according to the taxable amount.

It is worth noting that quarterly tax declaration is only applicable for small scale taxpayers.  The tax categories include value-added tax, consumption tax and cultural undertaking construction fee.

Quarterly declaration refers to small-scale taxpayers who each quarter shall file a tax return within fifteen days after the expiry of the period; taxpayers shall file a tax return and pay off the tax payable of the quarter for value-added tax, consumption tax and cultural undertaking construction fee every January, April, July and October within the limited period.

For example:
One small-scale taxpayer applies the quarterly declaration method from July 2016. According to the old regulation, the taxpayer shall file the VAT tax return in August and September. After the implementation of the announcement, the taxpayer would only file the tax return in the third quarter (July to September) in October.

(B) Small / low-profit enterprises meeting the requirements shall declare and prepay income tax on a quarterly basis.

A small / low-profit enterprise shall satisfy the following conditions:

• An industrial and manufacturing industry, with an annual taxable income of no more than CNY 300,000, a payroll size of at most 100 persons, and a total amount of assets not exceeding CNY 30 million;
• Other industries, with an annual taxable income of no more than CNY 300,000, a payroll size of at most 80 persons, and a total amount of assets not exceeding CNY 10 million;

According to the announcement, small / low-profit enterprises meeting the requirements shall declare and prepay EIT on a quarterly basis. There is no big change of the declaration procedure. The state always gives more tax incentives to small / low-profit enterprise to support their development. In accordance with the EIT Law, small / low-profit enterprises are subject to a reduced EIT rate of 20%.

Yet, according to the “Announcement of the State Administration of Taxation on Issues concerning the Implementation of the Expansion of the Scope of Small / Low-profit Enterprises Subject to Half-reduced Enterprise Income Tax”, small / low-profit enterprises meeting the required conditions, including those subject to taxation by self-assessment and those subject to taxation by assessment, may enjoy preferential EIT policies for small / low-profit enterprises for the period from October 1st 2015 to December 31st 2017.

Subsequently, for this group of taxpayers  EIT rate is reduced to 10% during the mentioned period.
ECOVIS Ruide in Shanghai and Taicang would gladly assist you with questions around this topic, relevant for many of our clients during their first three years operation in sales and service support to the headquarter in Europe.

Please contact us for more information via marketing@ecovis.cn  or our website www.ecovis.cn .