Can VAT special invoices be issued for tax-free products?

Q:Our unit is an agricultural product planting enterprise specializing in the production of green, pollution-free fruits and vegetables and directly supplying major chain supermarkets. Currently, one supermarket insists that our company issue a special VAT invoice. Can we issue a special VAT invoice to this supermarket and file and pay tax, while the business with other merchants is still filed as VAT-exempt?？

01Article 15, Item (1) of the "Interim Regulations of the People's Republic of China on Value-Added Tax"）According to the provisions, self-produced agricultural products sold by agricultural producers are exempt from VAT. Article 21 provides that where a taxable sales activity is subject to tax exemption provisions, no special VAT invoice may be issued.

02Article 36 of the "Detailed Rules for the Implementation of the Interim Regulations of the People's Republic of China on Value-Added Tax" stipulates that where taxpayers selling goods or taxable services are subject to tax exemption provisions, they may waive the exemption and pay value-added tax in accordance with the regulations. After waiving the exemption, they may not apply for exemption again within 36 months.

03Notice of the Ministry of Finance and the State Taxation Administration on Issues Concerning VAT Taxpayers' Waiver of Tax Exemption Rights（Cai Shui [2007] No. 127）Article 1 stipulates that taxpayers producing and selling VAT-exempt goods or services who request to waive the tax exemption shall submit a written waiver of tax exemption statement and report it to the competent tax authority for filing. From the month following the submission of filing materials, the taxpayer shall calculate and pay VAT in accordance with current relevant provisions.

Article 3 stipulates that once a taxpayer waives the tax exemption right, all VAT-taxable goods or services it produces and sells shall be taxed at the applicable tax rate. It may not choose to waive the tax exemption right for only one tax-exempt item, nor may it choose to waive the tax exemption right for only some goods or services based on different sales targets.

According to the above provisions, your entity may, after submitting a written declaration waiving the right to tax exemption and filing it with the competent tax authority for record, issue special VAT invoices. After waiving the right to tax exemption, your entity may no longer issue VAT ordinary invoices marked "tax-exempt," and shall levy tax on all goods produced and sold at the applicable tax rate.

Source: Beijing Tax

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