[Focus] Ten questions and ten answers interpreting policies and regulations on VAT rates

To facilitate taxpayers, fee payers, and grassroots tax authorities in consulting relevant policy response calibers, the State Taxation Administration comprehensively reviewed and confirmed the Q&A published externally from January 2019 to July 2024, and compiled the "Compilation of Q&A on a Series of Tax and Fee Support Policies Since 2019," covering 8 major categories, 34 special topics, and 294 currently effective response calibers. Today, learn about VAT rate adjustment policy relevant Q&A.

[Question 1] Starting from April 1, 2019, what VAT taxable activities are subject to the 9% tax rate?

Answer:Since April 1, 2019, the tax rate for VAT general taxpayers selling transportation, postal, basic telecommunications, construction, and real estate leasing services, selling real estate, transferring land use rights, and selling or importing the following goods is 9%: agricultural products such as grain and edible vegetable oil and edible salt; tap water, heating, cooling, hot water, coal gas, liquefied petroleum gas, natural gas, dimethyl ether, biogas, and coal products for residential use; books, newspapers, magazines, audio-visual products, and electronic publications; feed, chemical fertilizers, pesticides, agricultural machinery, and agricultural film; and other goods specified by the State Council.

[Question 2] What VAT taxable activities are subject to the 6% tax rate?

Answer:For general VAT taxpayers selling value-added telecommunications services, financial services, modern services (excluding leasing services), lifestyle services, and intangible assets (excluding land use rights), the tax rate is 6%.

[Question 3] A general VAT taxpayer had a VAT sales activity in March 2019 but had not yet issued a VAT invoice. If the taxpayer needs to issue a supplementary invoice after April 1, 2019, should the invoice be issued at the pre-adjustment tax rate or the post-adjustment tax rate?

Answer:For VAT taxable sales activities for which a general VAT taxpayer did not issue a VAT invoice before the VAT rate adjustment, if a VAT invoice needs to be issued retroactively after April 1, 2019, it shall be issued retroactively at the original applicable tax rate.

[Question 4] A general VAT taxpayer had a VAT sales activity at the end of March 2019 and issued a special VAT invoice. After April 1, 2019, the buyer informed that the goods need to be returned. At this point, the seller has not yet delivered the special VAT invoice to the buyer. How should the taxpayer issue the invoice?

Answer:Where a general VAT taxpayer has issued a VAT invoice at the original applicable tax rate before the VAT rate adjustment and needs to issue a red-letter invoice due to sales discounts, suspension, or returns, if the buyer has not yet used it for filing deduction, the seller may, after the buyer returns the invoice copy and deduction copy, fill out and upload the Information Form for Issuing Red-Letter VAT Special Invoices in the VAT invoice management system, and issue a red-letter invoice at the pre-adjustment tax rate.

[Question 5] Unit A obtained a VAT ordinary invoice with an incorrectly filled tax rate column. How should this be handled?

Answer:According to the Measures of the People's Republic of China for Invoice Administration, "invoices that do not comply with regulations shall not be used as financial reimbursement vouchers, and any unit or individual has the right to refuse them." Therefore, the obtained invoice copy can be returned to the seller, and the seller can be required to issue a correct invoice to Unit A again.

[Question 6] A general VAT taxpayer, when selling goods subject to the 16% tax rate in March 2019, mistakenly selected the 13% tax rate and issued a VAT invoice. How should the taxpayer handle this?

Answer:The invoice should be promptly voided in the tax control invoicing software or a red-letter invoice should be issued as required, then the invoice should be reissued at the correct tax rate.

[Question 7] After April 1, 2019, how should filing be done for supplementary invoices issued at the original applicable tax rate?

Answer:After the declaration form adjustment, when taxpayers declare taxable items subject to the original VAT rates such as 16% and 10%, they shall fill in the relevant columns separately according to the corresponding relationship before and after the declaration form adjustment.

[Question 8] If a general VAT taxpayer discovers an error in a VAT invoice already issued at the original applicable tax rates of 16% and 10% before the VAT rate adjustment, how should this be handled?

Answer:According to Article 1 of the Announcement of the State Taxation Administration on Matters Concerning Deepening the VAT Reform (State Taxation Administration Announcement No. 14 of 2019), where a general VAT taxpayer has issued a VAT invoice at the original applicable tax rates of 16% or 10% before the adjustment of VAT rates and the invoice contains errors and needs to be reissued, a red-letter invoice shall first be issued at the original applicable tax rate, and then the correct blue-letter invoice shall be reissued.

[Question 9] A general VAT taxpayer issued a special VAT invoice at the original applicable tax rates of 16% and 10% before the VAT rate adjustment on April 1, 2019. If circumstances such as sales returns, invoicing errors, or suspension of taxable services occur, and the buyer has not used it for filing deduction and has returned the invoice copy and deduction copy, how should the seller operate when issuing a red-letter invoice?

Answer:If the seller has issued a special invoice and the buyer has not used it for filing and deduction and returns both the invoice copy and the deduction copy, the seller shall issue a red-letter VAT special invoice according to the following process: (1) The seller fills in and uploads the "Information Form for Issuing Red-Letter VAT Special Invoices" (hereinafter referred to as the "Information Form") in the VAT invoice management system. When filling in the Information Form, the seller shall fill in the corresponding blue-letter special invoice information. (2) The competent tax authority receives the Information Form uploaded by the taxpayer via the network; after the system automatically verifies and passes it, it generates an Information Form bearing a "red-letter invoice information form number" and synchronizes the information to the taxpayer's system. (3) The seller issues the red-letter special invoice based on the Information Form verified and passed by the tax authority system, issuing it as a negative output amount in the system. The red-letter special invoice shall correspond one-to-one with the Information Form. (4) The taxpayer may also bring the electronic information or paper materials of the Information Form to the tax authority for systematic verification of the Information Form contents.

[Question 10] If a taxpayer issued a special VAT invoice before March 31, 2019, and after April 1 needs to issue a red-letter invoice due to sales discounts, suspension, or returns, how should this be handled specifically?

Answer:Where the taxpayer in the above example needs to issue a red-letter invoice due to sales discount, suspension, or return, the following situations shall be handled separately: (1) If the seller has issued a special invoice but has not yet delivered it to the buyer, and the buyer has not yet used it for filing and deduction and returns both the invoice copy and the deduction copy, the seller shall, in accordance with regulations, fill out and upload the "Information Form for Issuing Red-Letter VAT Special Invoice" in the VAT invoice management system, and issue a red-letter invoice at the pre-adjustment tax rate. (2) If the buyer has obtained the special invoice and already used it for filing and deduction, or the buyer has obtained the special invoice but has not yet filed for deduction and the invoice copy or deduction copy cannot be returned, the buyer shall, in accordance with regulations, fill out and upload the "Information Form for Issuing Red-Letter VAT Special Invoice" in the VAT invoice management system, and the seller shall issue a red-letter invoice at the pre-adjustment tax rate based on the "Information Form for Issuing Red-Letter VAT Special Invoice" filled out by the buyer.

Source: Shanghai Tax

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