Aug 2023 - The preferential policy for VAT small taxpayers
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The preferential policy for VAT small taxpayers
On 1 August 2023, the State Administration of Taxation (SAT) announced the tax preferential policy for VAT small taxpayers aiming at the VAT rate will be extended to December 31st, 2027.
We summarize down below key takeaways：
VAT rate for small taxpayers
- VAT exemption if monthly sales ≤ 100k (or quarterly ≤300k)
- VAT rate reduced from 3% to 1%
Conditions of small taxpayer
- Companies are born as small taxpayers
- VAT payable = levy rate × total turnover
- VAT input cannot be used to offset with output VAT
Point of attention
- Special VAT invoices cannot be issued on exempted income
- VAT small taxpayer can apply and switch to VAT general taxpayer even if sales do not exceed RMB 5M
- If sales exceed RMB 5M for 12 consecutive months, the company will have to switch to general taxpayer status
Should you have questions as to how these measures impact you, please do not hesitate to address your request directly to your Mazars point of contact.