In practice, there are two main ways to pay the business tax and surcharge for contracted projects, one is to withhold the tax from the employer; The other is that the construction contractor declares and pays by himself. At present, the practice of withholding taxes by the employer is more common. This paper analyzes the tax treatment and accounting methods of the contractor when withholding taxes by the employer is adopted.

I. Tax Treatment

"Provisional Regulations of the People's Republic of China on Business Tax" (hereinafter referred to as "Provisional Regulations on Business Tax") stipulates that if a general contractor subcontracts a project or subcontracts it to others, the turnover shall be the balance of the total contracted amount of the project minus the price paid to the subcontractor or subcontractor.

That is to say, after subcontracting, the general contractor shall calculate and pay the business tax based on the balance of the total contracted amount MINUS the price paid to the subcontractor, and the subcontractor shall bear the corresponding tax obligations for the subcontracted amount.

In practice, in order to simplify the collection and management procedures, ensure the timely storage of tax sources, and at the same time, in order to obtain the withholding fee income, the tax authorities generally adopt the practice of withholding taxes by the employer. In this case, when the general contractor and the party awarding the contract settle the project price, the party awarding the contract shall, after calculating the withholding business tax and surcharges in full according to the settlement price, provide the tax authorities with information such as the general contractor and the subcontracting agreement, and give them to the general contractor according to the withholding tax payment vouchers issued by the general contractor and the subcontractor respectively. The general contractor shall copy the subcontractor's tax payment vouchers as the payment vouchers for withholding the subcontractor's taxes, and then provide the original to the subcontractor. The general contractor and subcontractor shall conduct accounting treatment according to the tax payment certificate withheld and remitted by the employer.

Second, accounting treatment

The Accounting System for Enterprises, the Accounting Measures for Construction Enterprises and the new Accounting Standards for EnterprisesNo. 15-Construction Contract have not clearly defined the accounting of subcontracted projects. In practice, there are two main accounting methods for subcontracting projects of construction enterprises:

(1) Incorporate the income of subcontracted projects into the income of construction enterprises, and treat the subcontracted project payment as the construction cost of construction enterprises, which is the same as the projects undertaken by construction enterprises themselves.

This practice not only fully reflects the income and cost of the general contractor, but also is consistent with the provisions on the responsibilities and obligations of the general contractor in the Construction Law and the Contract Law. Moreover, the difference between the income determined in this way and the business tax determined in accordance with the Provisional Regulations on Business Tax is a normal difference between accounting and tax laws and does not affect the accounting of subcontracted projects.

(two) the income and expenditure of the subcontracted project are not accounted for by the revenue and expenditure system of the construction enterprise.

Although this practice is consistent with the provisions in the Provisional Regulations on Business Tax that "the turnover of a general contracting enterprise is the balance of the total contracted amount of the project minus the price paid to the subcontractor", it does not fully reflect the income and expenses of the general contractor. Therefore, the general contractor shall conduct accounting treatment according to the first method when accounting the operating income and expenses of the subcontracted project during each accounting period.