Relevant policies and regulations on prepayment of value-added tax in construction industry:

Announcement of State Taxation Administration of The People's Republic of China on Issuing the Interim Measures for the Administration of Value-added Tax Collection of Taxpayers Providing Construction Services across Counties (Cities, Districts) (State Taxation Administration of The People's Republic of China Announcement No.2016/7)

Article 4 Taxpayers who provide construction services across counties (cities, districts) shall pay taxes in advance in accordance with the following provisions:

(1) If the general taxpayer provides construction services across counties (cities, districts) and applies the general taxation method, the tax payable in advance shall be calculated according to the withholding rate of 2% based on the balance of the total price and extra-price expenses obtained after deducting the subcontracting payment.

(2) Where a general taxpayer provides construction services across counties (cities, districts) and chooses to apply the simple tax calculation method, the tax payable in advance shall be calculated at the rate of 3% based on the balance of the total price and out-of-price expenses obtained after deducting the subcontracting payment.

(3) For small-scale taxpayers who provide construction services across counties (cities, districts), the tax payable in advance shall be calculated at the rate of 3% based on the balance of the total price and out-of-price expenses obtained after deducting the subcontracts paid.

Article 5 Taxpayers who provide construction services across counties (cities, districts) shall calculate the tax payable in advance according to the following formula:

(1) If the general tax calculation method is applied, the tax payable in advance = (total price and out-of-price expenses-subcontracts paid) ÷ (1+11%) × 2%.

(2) If the simple tax calculation method is applied, the tax shall be paid in advance = (total price and out-of-price expenses-subcontracts paid) ÷( 1+3%)×3%.

If the balance of the total price and extra-price expenses obtained by the taxpayer after deducting the subcontracting payment is negative, it can be carried forward to continue to be deducted when the next tax payment is made.

Eleventh taxpayers across counties (cities, districts) to provide construction services in advance time, in accordance with the provisions of the Finance [2016] No.36 tax obligations and tax payment period.

Article 12 Taxpayers who provide construction services across counties (cities, districts) shall pay taxes in advance to the competent national tax authorities in the place where the construction services occur in accordance with these Measures, and if they fail to pay taxes in advance for more than six months from the month when they should pay in advance, the competent national tax authorities in the place where the institution is located shall handle it in accordance with the Law of the People's Republic of China on Tax Collection and Administration and relevant regulations.

For the accounting treatment of prepaid value-added tax in construction industry, please refer to the link: /link? url=%2Farticle%2Fhangye%2F20 160754006.html& q=%E5%BB%BA%E7%AD%9 1%E4%B8%9A%E9%A2%84%E4%BA%A4%E5%A2%9E%E5%80%BC%E7%A8%8E%E4%BC%9A%E8%AE%A 1%E5%88%86%E5%BD%95& ts= 1494393608& t=5787df3f46fa9d35eea 1d93abdbe6db& src=haosou