15 TAX ADMINISTRATION
15.1 Timing for tax liability arises
Per articles 33 of the detailed rules for the implementation on VAT, the timing for
VAT tax liability arises depends on the different settlement methods:
(1) For sales of goods under the direct payment method, no matter the goods is issued or not, it shall be the date that the consideration is received or the right to collect the consideration is obtained and the bills of lading are delivered to purchasers;
(2) For sales of goods under the appointment of agency for collection, it shall be the date that the goods are delivered and the procedures for the collection are completed;
(3) For credit sales or installment sales, it shall be the collection date per the contract;
(4) For sales of goods with payment received in advance, it shall be the date on which the goods are delivered;
(5) For sales of goods on consignment, it shall be the date on which the consignment report is received from the consignee;
(6) For sales of taxable services, it shall be the dates on which the services are provided and the sales sum is received or the right to collect is obtained;
(7) For those deemed sales activities, it shall be the date on which the goods are transferred.
For import of goods, it is the time for custom declaration for VAT liability arises.
15.2 Filing location
Filing location refers to the place that the taxpayer makes the tax filing and payment. It can be divided into several cases as follows:
(1) The taxpayer with fixed establishment
It must report and pay tax with the local tax bureau where the establishment is located. If the taxpayer has branches and the head office and the branches are not situated in the same county or city, they should report and pay VAT separately to their respective local tax bureau. The head office may, subject to the approval of the State tax bureau or its authorized tax bureau, report and pay the VAT on consolidated basis to the local tax bureau where the establishment of head office is located.
A taxpayer with fixed establishment selling goods in different county or city must apply for the issuance of ,a ¡®Tax Administration Certificate of Outbound Business activities¡± from the local tax bureau where the establishment is located. The related VAT must be reported and paid to the tax bureau where the establishment is located.
Without the certificate, the tax bureau in the place where sales activities take place may levy a 6% of the transaction value. As a penalty, such sales amount is still subject to output VAT at the location of the fixed establishment and the VAT paid in other locations cannot be claimed as a tax credit.
(2) The taxpayer without fixed establishment
It must report and pay tax with the local tax bureau where the sales activities take place.
(3) For importation of goods, the importer or its agent must report and pay tax to the custom authority where the custom declaration is made.
15.3 Filing period
For VAT purpose, the assessment period is equal to the filing period. Generally, a VAT is filed on monthly basis. According to the rules, it can be 1-day, 3-day, 5-day, 10-day, 15-day or one month. The actual filing period is determined by the tax bureau according to the size of the VAT payable by the taxpayer, where no fixed period can be made, it can be assessed on a transaction-by-transaction basis.
For those are assessed by monthly basis, the taxpayer should report and pay VAT within 10 days after the end of the period. If one of 1-day, 3-day, 5-day, 10-day, 15- day basis is adopted, the taxpayer should prepay VAT within 5 days after the end of the period and a monthly filing and settlement should be made within 10 days from the first day of the following month.
For importer, VAT should be paid within 7 days after the issuance of tax payment certificate.
For exporter, since most of the goods are taxed at zero rates, the VAT can be claimed on refund from the tax bureau after the export procedures are finished with the custom.
(i (Question 1, Dec, 2000 ACCA)
Company F is an ordinary taxpayer for VAT. The following are the transactions of
Company F for January 1999.
(1) Sales to a wholesaler of 9,000 boxes of product. The price per box is RMB 2,250 yuan plus RMB 150 yuan for packaging and after-sale service. The wholesaler has only paid for 6,000 boxes and the other 3,000 boxes are accepted as consignment, but the letter for consignment has not been provided. Company F issued a VAT receipt for 9,000 boxes of product after receiving the payment for the 6,000 boxes.
(2) Sales to an end user of 3,000 boxes of product at the price of RMB 2,475 yuan per box, the VAT receipt of which has been issued. Company F, who paid the transportation fee in advance on behalf of the end user, asked the transportation company to issue a transportation fee receipt for RMB 30,000 yuan. Both of the receipts have been given to the end user.
(3) Sales of 150 boxes of product at RMB 2,250 yuan per box to its own After-Sale Service Department.
(4) RMB 750,000 yuan sales in the form of a price-returning sale of which RMB 300,000 yuan has been paid as the returned price.
(5) Purchase of raw materials, the VAT indicated on the VAT receipt is RMB 2,250,000 yuan. The money has been paid in full but the materials have not been received yet.
(6) Purchase of spare parts, the VAT on the VAT receipt is RMB 90,000 yuan. The parts have been accepted.
(7) Purchase of office products for the total price of RMB 75,000 yuan, for which there is no VAT receipt.
(8) Company F calculates its VAT for January 1999 as follows:
VAT for sales = (2,250 x 6,000 + 2,475 x 3,000 + 750,000 - 300,000) x 17% 3,633,750
VAT for purchase 2,250,000 + 90,000 + 75,000 x 6% + 30,000 x 7% = 2,346,600 VAT of Company F for January 1999 = 3,633,750-2,346,600 = 1,287,150
Note: Price-returning sale is a method whereby the seller will return the purchase price to the buyer in several installments beginning with several years after the sale of the goods.
You are required:
(a) to identify the mistakes made by the company in (i) its calculation of VAT
and (ii) its issuance of receipt. Give brief reasons in each case, and
(b) to calculate the correct amount of VAT payable for January 1999 by
Company F.
@ (Question 1, June 1999 ACCA)
Flying Dragon Co (FDC) produces bicycles. It is classified as a general taxpayer for the purpose of calculating VAT. The ex work price (not including tax) of the bicycles produced by FDC is 290 yuan for each bicycle. FDC has the following sales and purchase in November 1998:
(1) 1,000 bicycles were sold to the local department store, which were paid in full in the same month. FDC provided an 8% discount, which was recorded in the accounts with red-letter receipt, but was not reflected in the VAT invoice.
(2) 600 bicycles were sold to stores outside the city. FDC paid 8,000 yuan for the transportation of these bicycles, the receipt of which listed 7,000 yuan for transportation and 1,000 yuan for loading and unloading.
(3) A car o FDC that had been used for two years was sold for 100.0000 yuan.
(4) 50,000 yuan of package deposits, which were overdue, were recorded as sales income.
(5) Spare parts and raw materials for producing bicycles were purchased, the special receipt of which listed sales price 140,000 yuan and stated 23,800 as tax.
(6) Spare parts of 90,000 were purchased from small-scale tax payers without a special receipt.
(7) Used bicycles were directly purchased by FDC, who paid 70,000 yuan. The accountant of FDC calculated the VAT for that month as follows:
The tax for the sales of the month
= [1,000 x 290 x (1 - 8%) + 600 x 290 + 100,000 + 70,000) x 17%
= [266,800 + 174,000 + 100,000 + 70,000] x 17%
610,800x 17%
= 34,760 yuan
VAT payable for the month = 103,836-34,760 = 69,076 yuan
Note:
The deemed input VAT credit rate for transportation invoices is reduced from 10% to 7% effective 1 July 1998.
The applicable tax rate for selling a second-hand car is 6%.
Required:
(a) Identify and explain the mistakes in the calculation of the VAT by the accountant of FDC; (14 marks)
(b) Calculate the VAT of FDC for November 1998. (9 marks)
@ Exam-typed question
A production enterprise (normal rate taxpayer for VAT) conducted the following
business in a month:
(1) The sales for the month RMB300,000, the goods are delivered but the money is not received from the customers;
(2) Raw material with cost RMB10,000 is used for staff benefit;
(3) Finished goods with selling price RMB2O,000 is used for investment purpose
(4) A machine from trade-in was sold out and only ordinary invoices RMB 100,000 was issued by the enterprise;
(5) Raw material is paid for RMB 1,000,000 but it is not deliver to the enterprise;
(6) VAT shown on water and electricity's bill is RMB 1,000;
(7) VAT shown on the special invoices for purchase of part for the production machine is RMB7,000;
(8) VAT shown on the special invoices for service rendered to repair the staff quarter is RMB8,000;
(9) VAT shown on the special invoices for television for the staff quarter is RMB9,000.
Please calculate the VAT payable for the month.
(1) It is payable even the money is not received from the customers;
(2) The input VAT should be transfer out as it is for staff benefit;
(3) It is a deemed dales activity;
(4) Although an ordinary invoice is issued, the amount is treated as VAT inclusive;
(5) Even the purchase money was paid but for production enterprise, the goods must be received and stored in warehouse for VAT deduction purpose;
(6) It is input VAT deductible;
(7) Since it is for production purpose, it is input VAT deductible;
(8) And (9) Both are for staff benefit's purpose and it is non VAT deductible.
The input VAT for the month= 1,000+7,00010,000* 1 7%6,300
The output VAT for the month =300,000*1 7%+20,000* 17%
+100,000/1.17*1 7%=68,930
The net VAT payable=62,630