Input tax amount, transfer out -- Hydropower Finance Department -- Knowledge Changes Fate

Notification of the State Administration about Printing and Distributing "Answers to Value-Added Tax Issues (I)" Guoshui Letter Fa [1995] No. 288

Twelve, Question: According to Article 23 of the Detailed Rules for Implementation of Value-Added Tax, if a taxpayer operates both tax-exempt projects or non-taxable projects and cannot accurately distinguish the input VAT that cannot be offset, the undeductible input VAT is calculated using the formula based on the proportion of the monthly sales of tax-exempt projects and non-taxable business turnover to the total monthly sales and business turnover multiplied by the total monthly input VAT. In actual practice, due to uneven purchases and sales between months for taxpayers, there is an issue where the calculated undeductible input VAT is inaccurate according to the above formula. How should this be handled?

Answer: For cases where taxpayers have uneven purchase and sales between months resulting in inaccurate calculations of undeductible input VAT according to the aforementioned formula, the tax collection authority may adopt an annual settlement method. That is, at year-end, calculate the undeductible input VAT for the year based on the relevant data for the year and adjust the monthly calculated data accordingly.

Provisional Regulations of the People's Republic of China on Value-Added Tax, Order of the State Council [1993] No. 134

Article 10: The following input VAT amounts shall not be deducted from output VAT:

(1) Purchase of fixed assets;

(2) Goods or taxable services purchased for use in non-taxable projects;

(3) Goods or taxable services purchased for use in tax-exempt projects;

(4) Goods or taxable services purchased for collective welfare or personal consumption;

(5) Purchased goods with abnormal losses;

(6) Abnormal losses of semi-finished products or finished products consumed by purchased goods or taxable services.

Article 17: If a taxpayer simultaneously operates tax-exempt or tax-reduced projects, they must separately account for the sales of tax-exempt or tax-reduced projects; if sales are not separately accounted for, no tax exemption or reduction will be granted.

Detailed Rules for Implementation of the Provisional Regulations of the People's Republic of China on Value-Added Tax, Cai Fa Zi [1993] No. 38

Article 4: The following actions by entities or individual operators are considered as equivalent to selling goods:

(1) Entrusting others to sell goods on consignment;

(2) Selling consigned goods;

(3) Moving goods from one institution to another for sale within a taxpayer who has two or more institutions under unified accounting, except when the related institutions are located in the same county (city);

(4) Using self-produced or commissioned processed goods for non-taxable projects;

(5) Using self-produced, commissioned processed, or purchased goods as investments provided to other units or individual operators;

(6) Allocating self-produced, commissioned processed, or purchased goods to shareholders or investors;

(7) Using self-produced or commissioned processed goods for collective welfare or personal consumption;

(8) Giving away self-produced, commissioned processed, or purchased goods free of charge to others.

Article 20: Non-taxable projects referred to in Article 10 of the Regulations include providing non-taxable services, transferring intangible assets, selling real estate, and construction of fixed assets. Whether the taxpayer builds, renovates, expands, repairs, or decorates buildings, regardless of how it is accounted for under accounting systems, it all falls under the category of construction of fixed assets mentioned in the preceding paragraph.

Article 21: Non-normal losses referred to in Article 10 of the Regulations mean losses beyond normal wear and tear during production and operation processes, including:

(1) Losses due to natural disasters;

(2) Losses caused by theft, mold, deterioration, etc., due to poor management;

(3) Other non-normal losses.

Article 22: For purchased goods or taxable services whose input VAT has already been deducted and which fall under items (2) to (6) of Article 10 of the Regulations, the input VAT of such purchased goods or taxable services should be deducted from the input VAT incurred in the current period. If the exact amount of such input VAT cannot be determined, it should be calculated based on the actual cost in the current period.

Article 23: If a taxpayer simultaneously operates tax-exempt projects or non-taxable projects (excluding construction of fixed assets) and cannot accurately divide the undeductible input VAT, the undeductible input VAT shall be calculated according to the following formula:

Undeductible Input VAT = Total Monthly Input VAT * (Monthly Sales of Tax-Exempt Projects + Non-Taxable Project Turnover) / (Total Monthly Sales + Turnover)

Cai Shui [2005] No. 165 "Notice on Several Issues Regarding Value-Added Tax"

Four, Calculation and Division of Undeductible Value-Added Tax Input Tax Amounts: If a taxpayer simultaneously operates tax-exempt projects or non-taxable projects (excluding construction of fixed assets) and cannot accurately divide the undeductible input VAT part, the undeductible input VAT shall be calculated according to the following formula:

(Undeductible Input VAT = (Total Monthly Input VAT - Monthly Accurately Divided Input VAT for Taxable Projects, Exempt Projects, and Non-Taxable Projects) * (Monthly Sales of Exempt Projects + Non-Taxable Project Turnover) / (Total Monthly Sales + Turnover)) + Monthly Accurately Divided Input VAT for Exempt Projects and Non-Taxable Projects.

Supplementary Notice on Revising the Provisions for the Use of Special Value-Added Tax Invoices