At the end of February 2020, in response to the State Council’s tax support for small-scale value-added tax taxpayers, including individual industrial and commercial households, to help alleviate the impact of the epidemic and provide relief. The Ministry of Finance and the State Administration of Taxation issued Finance and Taxation Announcement No. 13 of 2020, and the next day, the State Administration of Taxation issued State Taxation Announcement No. 5 of 2020. Now we will share some key issues combined with the professional interpretation of Anxin Finance and Taxation.

Policy Basics Are the entities enjoying this preferential treatment limited to individual industrial and commercial households? Answer: No, it is all small-scale taxpayers. Including individual industrial and commercial households, sole proprietorships, partnerships and natural persons issuing invoices on their behalf. Are there any restrictions on enjoying the discount? Answer: Based on the time when the tax liability occurs, you can only enjoy it from March 1, 2020 to May 31, 2020. Secondly, the tax rate is limited to 3% for small-scale taxpayers, and small-scale taxpayers in certain specific industries who are subject to a 5% tax rate are not eligible. Is the issuance of special invoices tax-free? Answer: The issuance of general invoices in Hubei is tax-free, while the issuance of special invoices is taxed at a full 3% rate. For non-Hubei areas, the collection rate is reduced to 1%. If you meet the requirements of Finance and Taxation No. 13 of 2019 on "Small-scale VAT taxpayers with monthly sales of less than 100,000 yuan (or quarterly sales of 300,000 yuan) (inclusive) , From January 1, 2019 to December 31, 2021, "Exemption from Value-Added Tax", you can enjoy the exemption, provided that no special invoices are issued. If a special invoice is issued, a value-added tax of 1% will be levied. What should I do if I don’t know how to fill out the declaration form for this reduction? Answer: First of all, the declaration form itself for small-scale taxpayers is relatively simple. Combined with the National Taxation Announcement No. 5 of 2020, there are detailed formulas and filling instructions. Secondly, the Jinsan system will automatically collect data. Calculate and fill in, finance only needs to calculate and check. The requirements for filling out this report are mainly for the purpose of quantifying the effect of tax reduction. Small-scale taxpayers do not need particularly strong professional knowledge. In addition to a separate formula for converting tax-exclusive sales, this tax reduction does not involve special accounting treatment, non-operating income accounts, or adjustments to corporate income tax. Taxable income. It also fully considers the actual situation such as the accounting capabilities of small-scale taxpayers. Will it affect the transaction price? Answer: Buyers may use a reduction in the collection rate to ask suppliers to reduce prices, resulting in a lower transaction price. Can small-scale taxpayers give up this preferential treatment? Answer: Yes, small-scale taxpayers in Hubei can choose to give up this preferential treatment and enjoy the tax exemption in accordance with the policy of supporting the resumption of work and business; they can also give up the tax exemption and be taxed at 3% Declaring taxes at the highest rate and issuing special invoices. Companies outside of Hubei that obtain taxable sales income subject to a 3% tax rate can enjoy the preferential tax reduction of 1% in accordance with the policy to support the resumption of work and business, and issue special invoices at a 1% tax rate; they can also waive the reduction. To pay tax, declare tax at a 3% tax rate and issue a special invoice with a 3% tax rate.

Professional Interpretation

1. Among the policies for non-Hubei regions, many documents mention that the value-added tax collection rate has been reduced from 3% to 1%, reduced to 1%, and reduced mortgage rates. 1%, what does it mean specifically, and what is the difference? Answer: The tax rate is reduced from 3% to 1%, to 1%. The essence is the same meaning, which means a reduction in the tax rate, directly from 3% to 1%. It is a tax rate exemption, and this time it is a temporary exemption. The mortgage rate is reduced by 1%, and the price and tax are separated and the formula for conversion excluding tax is: tax-included price/(1+1%). If interpreted according to previous policies, the conversion formula should be: tax-included price/(1+3%) ), and then calculate the value-added tax payable as the tax-exclusive price * 1%, which means that the legal tax rate is still 3%, but the discount is levied at 1%. The key point is the formula for calculating the tax-exclusive price. For example, when taxpayers sell used goods, they enjoy a preferential policy of 3% discount and 2% discount. The formula for converting price and tax separately and excluding tax is: tax-included price/(1+3%), and then calculate it as tax-exclusive*2% The value-added tax payable is calculated, and special invoices are not allowed to be issued. Or taxpayers can choose to give up this discount, pay at 3%, and choose to issue a special invoice.

2. Does this reduction in the collection rate mean an increase in corporate profits? Answer: Value-added tax is an extra-price tax and has no impact on corporate profits. Therefore, profits will not increase and the benefits are for the end consumers. However, this VAT reduction policy will directly reduce the cash flow expenditure of enterprises, which is a substantial burden reduction. But this is also the interesting part of VAT. It plucks goose feathers without the goose knowing it. This is also the reason why VAT has been widely adopted by governments of various countries since it was invented by the French.

Refer to the original link of the State Administration of Taxation: Finance and Taxation Announcement No. 13 of 2020, National Taxation Announcement No. 5 of 2020 on Hot Topics on Preferential Tax Policies for Epidemic Prevention and Control (Seventh Issue) Anxin Finance and Taxation is worth knowing

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