According to Article 27 of the Implementation Measures for the Pilot Reform of Business Tax to VAT (Caishui [20 1 6] No.36), the input tax on purchased passenger services, loan services, catering services, daily services of residents and entertainment services shall not be deducted from the output tax.

Annex 2 of the Provisions on Relevant Matters Concerning the Pilot Project of Changing Business Tax to Value-added Tax (Caishui [2016] No.36) further clarifies that the input tax shall not be deducted from the output tax when the taxpayer accepts the loan service and pays the lender the investment and financing consulting fees, handling fees and consulting fees directly related to the loan.