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Announcement of the Ministry of Finance and the State Taxation Administration to Further Step up the2022-03-21 16:14:57

Announcement of the Ministry of Finance and the State Taxation Administration to Further Step up the Application of End-of-Period Excess Input Value-Added Tax Credit Refund Policies

Announcement of the Ministry of Finance and the State Taxation Administration [2022] No.14

March 21, 2022


To support the development of micro and small enterprises as well as the manufacturing and other sectors, boost the confidence of market participants and incentivize them, a further enhancement of the application of the relevant end-of-period excess input value-added tax credit (hereinafter referred to as the "VAT credit") refund policies is hereby announced as follows:

1. The end-of-period VAT credit refund policy shall be enhanced for micro and small enterprises, by extending the applicable scope of the policy of full refund of incremental VAT credits on a monthly basis that is applicable to the advanced manufacturing sector, to eligible micro and small enterprises (including individually-owned businesses, hereinafter the same), as well as granting a lump sum refund of existing tax credits to micro and small enterprises.
(1) Starting from the tax filing period of April 2022, an eligible micro or small enterprise may apply to the competent tax authority for a refund of its incremental VAT credit amount. Before December 31, 2022, the VAT credit refund eligibility conditions shall be subject to Article 3 of this Announcement.
(2) Starting from the tax filing period of April 2022, an eligible micro enterprise may apply to the competent tax authority for a lump-sum refund of its existing tax credit amount; and starting from the tax filing period of May 2022, an eligible small enterprise may apply to the competent tax authority for a lump-sum refund of its existing tax credit amount.

2. The end-of-period VAT credit refund policy shall be enhanced for the "manufacturing", "scientific research and technical services", "electricity, heating, gas and water production and supply", "software and information technology services", "ecological protection and environmental governance" and "transport, warehousing and postal " sectors (hereinafter referred to as “manufacturing and other sectors”) , by extending the policy of full refund of incremental VAT credits on a monthly basis that is applicable to the advanced manufacturing sector, to eligible enterprises (including individually-owned businesses, hereinafter the same) in the manufacturing and other sectors, as well as granting a lump sum refund of existing VAT credit amount to enterprises in the manufacturing industry and other sectors.
(1) Starting from the tax filing period of April 2022, an eligible enterprise in the manufacturing and other sectors may apply to the competent tax authority for a refund of its incremental VAT credit amount.
(2) Starting from the tax filing period of July 2022, an eligible medium-sized enterprise in the manufacturing and other sectors may apply to the competent tax authority for a lump-sum refund of its existing VAT credit amount; and starting from the tax filing period of October 2022, an eligible large enterprise in the manufacturing and other sectors may apply to the competent tax authority for a lump-sum refund of its existing VAT credit amount.

3. To be eligible for the policies provided in this Announcement, a taxpayer must meet all of the following conditions:
(1) its tax credit rating is A or B;
(2) it has not obtained any VAT credit refund or export tax refund in a fraudulently manner or falsely issued any VAT invoice in the 36 months prior to the application for the tax refund;
(3) it has not been subjected to penalties on two or more occasions by a tax authority for tax evasion in the 36 months prior to the application for tax refund; and
(4) it has not benefited under the policy of “immediate refund upon payment" or “return/refund after payment” of excess VAT since April 1, 2019.

4. The following distinction shall be made regarding the “incremental VAT credit amount” as mentioned in this Announcement:
(1) before a taxpayer is refunded its existing VAT credit amount in a lump sum, its incremental VAT credit amount shall be the newly increased VAT credit amount between its VAT credit amount as at the end of the current period and that as at March 31, 2019.
(2) after a taxpayer is refunded its existing VAT credit amount in a lump sum, its incremental VAT credit amount shall be its VAT credit amount as at the end of the current period.

5. The following distinction shall be made regarding the “existing VAT credit amount” as mentioned in this Announcement:
(1) before a taxpayer is refunded its existing VAT credit amount in a lump sum, its existing VAT credit amount shall be its VAT credit amount as at March 31, 2019 if its VAT credit amount as at the end of the current period is greater than or equal to that as at the end of March 31, 2019; otherwise, its existing VAT credit amount shall be its VAT credit amount as at the end of the current period.
(2) after a taxpayer is refunded its existing VAT credit amount in a lump sum, its existing VAT credit amount shall be zero.

6. The “medium-sized enterprises”, “small enterprises” and “micro enterprises” as mentioned in this Announcement shall be defined based on the operating income indicator and total assets indicator set forth in the Provisions on Classification Standards for Small and Medium-sized Enterprises” (Gong Xin Bu Lian Qi Ye [2011] No. 300, hereinafter referred to as the Document [2011] No. 300) and the Provisions on Classification Standards for Financial Sector Enterprises (Yin Fa [2015] No. 309, hereinafter referred to as the Document [2015] No. 309), in which, the total assets indicator shall be determined based on the taxpayer's asset value as at the end of the last financial year, and the operating income indicator shall be determined based on the taxpayer’s VAT taxable sales amount for the last financial year, or if the operating period is less than a year, shall be calculated using the following formula:
VAT taxable sales amount (annual) = VAT taxable sales amount during the actual existence of the enterprise in the last financial year / number of months of actual existence of the enterprise × 12
The “VAT taxable sales amount” as mentioned in this Announcement include the sales amount stated in the VAT return, any additional sales amount adjusted during a tax audit, and any sales amount upward adjusted during a tax assessment. Where the “net deducted basis” calculation method is applied in calculating the taxable sales amount, the VAT taxable sales amount shall be based on the net sales amount after the deduction.
Where taxpayers are outside the sectors listed in the Document [2011] No. 300 or Document [2015] No. 309, or taxpayers are in the sectors listed in the Document [2011] No. 300 but are not classified based on the operating income indicator or total assets indicator, the standard for micro-enterprises shall be a VAT taxable sales amount (annual) that is below CNY1 million; the standard for small enterprises shall be a VAT taxable sales amount (annual) that is below CNY20 million; and the standard for medium-sized enterprises shall be a VAT taxable sales amount (annual) that is below CNY100
The term “large enterprises” as mentioned in this Announcement refers to enterprises other than the above-mentioned medium-sized enterprises, small enterprises, and micro-enterprises.

7. The term “enterprises in the manufacturing and other sectors” as mentioned in this Announcement refers to taxpayers whose VAT taxable income derived from engaging in activities in the “manufacturing”, “scientific research and technical services”, “electricity, heating, gas and water production and supply”, "software and information technology services", "ecological protection and environmental governance" or "transport, warehousing and postal" sector, accounts for more than 50% of their total VAT taxable sales amount.
The above-mentioned sales proportion shall be calculated based on the taxpayer’s sale amount for the 12 consecutive months prior to the application for tax refund; or if its operating period prior to the application for tax refund is less than 12 months but more than 3 months, based on the sale amount for the actual operating period.

8. The VAT credit amount to be refunded to a taxpayer eligible for the policies under this Announcement shall be calculated using the following formula:
Refundable incremental VAT credit amount = incremental VAT credit amount × proportion in input tax × 100%
Refundable existing VAT credit amount = existing VAT credit amount × proportion in input tax × 100%
The proportion in input tax shall be the amount of VAT as stated in the special VAT invoices (including fully-digitalized electronic invoices with the words "Special Value-Added Tax Invoices" on them, as well as tax control system-issued uniform invoices for motor vehicle sales), electronic general VAT invoices for turnpike tolls, special customs certificates for payment of import VAT, and tax payment certificates issued by withholding agents, which have been credited as input tax during the time period from April 2019 to the tax period prior to the application for tax refund in which the VAT credit amount to be refunded falls, as a percentage of the total amount that has been credited as input tax during the same time period.

9. In the case of the export of goods or services or cross-border taxable behaviors, where the “VAT exemption, offset and refund” measures apply, taxpayers shall first apply to benefit under the “VAT exemption, offset and refund” measures. After the completion of that procedure, if they still meet the eligibility conditions set out in this Announcement, they may apply for a VAT credit refund; and if the “VAT exemption/refund” measure has been applied, the input tax amount concerned shall not be counted towards the VAT credit amount to be refunded.

10. Taxpayers who have been refunded VAT credits since April 1, 2019 shall not apply to benefit under the policy of “immediate refund upon payment" or “return/refund after payment” of excess VAT. They may apply to benefit under the policy of “immediate refund upon payment" or “return/refund after payment” of excess VAT in accordance with regulations after repaying, in a lump sum, the full amount of VAT credits that has been refunded to them before October 31, 2022.
Taxpayers who have benefited under the policy of “immediate refund upon payment" or “return/refund after payment” of excess VAT since April 1, 2019 may apply for a VAT credit refund in accordance with regulations after repaying, in a lump sum, the full amount of excess VAT that has been refunded or returned to them before October 31, 2022.

11. A taxpayer may, at its option, apply to the competent tax authority for a VAT credit refund, or have the credits carried forward to the next period. In a tax filing period, the application for a VAT credit refund should be made after the completion of filing the current VAT tax return. The application period for VAT credit refunds for each month from April to June 2022 will be extended to the last business day of that month.
Taxpayers may apply for both a refund of incremental VAT credits and a refund of existing VAT credits within the specified time period. Taxpayers who are eligible for both the VAT credit refund policies stated respectively in Articles 1 and 2 of this Announcement may choose, at its own discretion, to apply to benefit under either of the two policies.

12. After a taxpayer has been refunded VAT credits, it shall adjust down its current VAT credit amount accordingly.
If it is found that a VAT credit refund policy has been applied wrongly to a taxpayer, the taxpayer shall repay the refunded VAT credit amount concerned by the end of the next tax filing period.
Where a VAT credit refund has been obtained by adding any false input tax entry, filing a false tax return or other fraudulent means, tax authorities shall recover the amount of VAT credit refund fraudulently obtained, and deal with the case in accordance with the Law of the People's Republic of China on the Administration of Tax Collection and other relevant regulations.

13. For tax administration matters related to the processing of the VAT credit refunds to taxpayers eligible for the VAT credit refund policies under this Announcement, the current regulations shall still apply.

14. Where taxpayers other than the above-mentioned taxpayers apply for the refund of incremental VAT credits, the Announcement of the Ministry of Finance, the State Taxation Administration and the General Administration of Customs on Policies Concerning the Deepening of the Value-Added Tax Reform (Announcement of the Ministry of Finance, State Taxation Administration and General Administration of Customs No. 39 [2019]), in which, the provision of Article (3) of Section 8 shall be subject to the provision of Article 8 of this Announcement in relation to the “proportion in input tax".

15. Finance and tax authorities at various levels must place VAT credit refunds as a high-priority work, and find out the base number, make careful planning, step up publicity, collaborate with each other closely, and advance the work in a coordinated manner, and the existing VAT credits of micro, small, medium-sized and large enterprises shall be refunded to them in a centralized manner by April 30, June 30, September 30 and December 31 2022, respectively. Tax authorities shall process VAT credit refunds for taxpayers in a standardized, efficient and accessible manner based on their applications.

16. This Announcement shall come into force on April 1, 2022. The Announcement of the Ministry of Finance and the State Taxation Administration on Clarifying the End-of-Period VAT Credit Refund Policy for Certain Taxpayers in the Advanced Manufacturing Sector (Announcement of the Ministry of Finance and the State Taxation Administration No. 84 [2019]), Article 6 of the Announcement of the Ministry of Finance and the State Taxation Administration on Clarifying the VAT Policies for the Leasing of State-owned Farm and Others (Announcement of the Ministry of Finance and State Taxation Administration No. 2 [2020] ), and the Announcement of the State Taxation Administration and the Ministry of Finance on Clarifying the End-of-Period Excess Input VAT Credit Refund Policy for the Advanced Manufacturing Sector (Announcement of the State Taxation Administration and the Ministry of Finance [2021] No. 15) shall be abolished simultaneously.

The Announcement is hereby given.