6. AGENCY ACTIVITIES
6.1 Agency in purchase activities:
If the following 3 conditions are satisfied simultaneously, business tax is levied on the commission received by the agent. Otherwise, VAT should be levied on the purchase amount including commission fee:
The agent does not pay in advance on behalf of the principal;
The selling party issues the VAT invoices in the name of the principal for the agent's onward submission to the principal;
The agent settles the purchase with the principal and separately receives commission.
6.2 Agency in sales activities:
(a) The sales are conducted at no margin
If there is no additional mark up in the transaction, the sales is taxed under the
Value-Added Tax and while the commission is taxed under business tax.
(b) The sales are conducted at margin
if there is an additional mark up in the transaction, the additional amount is included both into the calculation of the tax liabilities of business tax and VAT.
¡®a Calculate the business tax and VAT for an agent that having the following:
A manufacturer appoints the agent to sell 20,000 items for RMB8O each, commisson RMB5 each; the agent sold all the items at RMB9O each.
Business tax [(90 80) x 20,000 + 5 x 20,000] x 5% RMB 1 5,000. VAT= 90x20,000x 1 7%-80x20,000x I 7%RM B34,000.