4. TAX RATE
4.1 Normal rate
The normal rate is 17%. A taxpayer is a general VAT taxpayer who can maintain good accounting system to provide accurate tax information for the output tax, input tax and tax payable with its annual taxable turnover reaching:
(i) RMB 1,000,000 if it engages principally in the production of goods or provision of taxable services or
(ii) RMB 1,800,000 if it engages principally in the whole selling or retailing.
The tax bureau only allows the general rate taxpayer to obtain and issue the VAT invoice. A small-scale taxpayer can only issue ordinary invoices. A VAT invoices is a very important document to entitle the purchaser of a transaction to claim their input VAT. The tax bureau on the VAT invoices implements a very tight control system.
4.2 Small-scale taxpayer rate
Any taxpayer who cannot maintain good accounting system to provide accurate tax information for the output tax, input tax and tax payable might be treated as a VAT small-scale taxpayer. Individuals, non-corporate business and enterprise with infrequent taxable activities are deemed to be small-scale taxpayer.
The tax rate for small-scale taxpayer who engages trading goods is 4% (for others are 6%) and no input tax can be deducted to determine the VAT payable. They are not allowed to issue VAT invoices and so they can only issue general invoices, which include the sales consideration and VAT. Therefore in general unless otherwise stated, the sales amount involved in transaction with small-scale taxpayer should be treated as sales consideration plus VAT.
The following goods are subject to 13%
Food grains and edible vegetable oil
Tap water, heating, air conditioning, hot water, coal gas, liquefied petroleum gas, natural gas, methane gas, coal! charcoal products for household use;
Books, newspapers, magazines;
4.3 Lower rate Feeds, chemical fertilizers, agricultural chemicals, agricultural machinery and covering plastic film for farming;
Other goods as regulated by the State Council.
4.4 Zero rate
Normally for export goods, the tax rate is 0%. Output VAT is exempted on the exported goods (except for some special goods such as crude oil).
@A shop (which is a small-scale taxpayer of value added tax) purchased 225 of kids wear; it sold all the clothes by 147 dollars (including tax) for each clothe. Calculate the value added tax for the sales of all the kids wear.
Value added tax for the sales of all the kids wear = 225 x 147 ¡Â (1 + 4%) x 4% =
1272.11 dollars