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No More Doubts! Q&A about Small-scale Taxpayers You Concerned

As stipulated, VAT taxpayers in China are categorized into general taxpayers and small-scale taxpayers based on the level of financial accounting and scale of business.

Taxpayers with annual revenue exceeding the ceiling set for small scale taxpayers must apply for general taxpayer status.  The current ceiling for all companies is 5 million RMB a year.

Generally speaking, if any company’s annual taxable revenue reaches the ceiling of 5million RMB, then it will be treated as a general tax payer. However, companies with an annual revenue below the ceiling and those who have recently established their business, can voluntarily apply to be general taxpayer as long as they are capable of setting up legitimate, valid, and accurate bookkeeping.

In order to further facilitate taxpayers to understand the relevant policies of tax reduction and fee reduction correctly and effectively solve the problems encountered in the work. Elitesatge collects following questions that often asked by taxpayers. Let’s see if there are any concerns you have.

Q1. If the monthly sales of small-scale taxpayers exceed 100000 yuan, do they pay taxes in part or in full?

A: for small-scale taxpayers who pay tax monthly, if the monthly sales amount exceeds 100000 yuan, they need to calculate and pay VAT in full on the sales amount.

Q2. Can small-scale taxpayers be exempt from VAT if their monthly sales exceed 100000 yuan but their quarterly sales do not exceed 300000 yuan?

A: If it is a small-scale taxpayer who pays tax by month, the month when the monthly sales amount exceeds 100000 yuan cannot enjoy tax exemption; if it is a small-scale taxpayer who pays tax by quarter, the month when the monthly sales amount exceeds 100000 yuan but the quarterly sales amount does not exceed 300000 yuan can enjoy tax exemption according to regulations.

Q3. What is the standard of monthly (quarterly) sales of VAT small-scale taxpayers?

A: the announcement of the State Administration of Taxation on the collection and management of VAT exemption policies for small-scale taxpayers (Announcement No. 4, 2019 of the State Administration of Taxation) stipulates that the total sales volume of all VAT taxable sales behaviors (including sales of goods and services, services, intangible assets and real estate) is used by taxpayers to determine whether they meet the tax exemption standards. 

At the same time, if the total monthly sales volume of small-scale taxpayers exceeds 100000 yuan, but the sales volume of real estate sales in the current period is not more than 100000 yuan, the sales volume of goods, services, services and intangible assets sold by small-scale taxpayers shall be exempted from value-added tax.

Q4. How to define the applicable objects of VAT exemption policy for small-scale taxpayers?

A: to raise the tax exemption standard for small-scale VAT payers, the policy is applicable to small-scale taxpayers whose annual taxable sales are less than 5 million yuan. There is no other standard, and there is no corresponding relationship with the small and micro enterprises in the provisions of the small and medium-sized enterprise classification standard of the four ministries and commissions.

Q5. For small-scale taxpayers with different tax payment periods, the effect of tax-free policies may be different. Can small-scale taxpayers choose to pay taxes on a monthly or quarterly basis?

A: the small-scale taxpayer that pays taxes according to fixed term can choose to pay taxes by month or by quarter according to his actual business situation. In order to ensure that the taxpayer’s tax payment period is relatively stable within the year, once the taxpayer has chosen, it cannot be changed within – accounting years. 

Here, an accounting year means January to December as mentioned in accounting, rather than one year from the date of selection. At any time in each fiscal year, the taxpayer may propose to the competent tax authority to change its tax payment period, but once the taxpayer chooses to change its tax payment period, it shall not change again before December 31 of the current year.

Q6. What is the impact of changing the tax payment period in a taxpayer’s quarter on enjoying the tax exemption policy of less than 100000 yuan of monthly sales of value-added tax?

A: the actual application time for taxpayers to change the tax period (including changing from month to quarter or from quarter to month) is different, and the effective time of the tax period after the change is different. If you apply for changing the tax period within the first month of the quarter, you can declare and pay tax according to the changed tax period from the quarter where you apply for changing the tax period; if you apply for changing the tax period within the second or third month of the quarter, you can still declare and pay tax according to the tax period before the change within the quarter where you apply for changing the tax period, and you can declare and pay tax according to the changed tax period from the next quarter.

If a small-scale taxpayer applying for monthly tax declaration applies for changing to quarterly tax declaration within the first month of the quarter, he can apply for quarterly tax declaration from the quarter where the change is applied for, and the tax exemption standard of quarterly sales amount not exceeding 300000 yuan is applicable; if he applies for changing to quarterly tax declaration within the second and third months of the quarter, he can still apply for monthly tax declaration in the quarter where the change is applied for, and the monthly sales amount is applicable The tax exemption standard of no more than 100000 yuan can be declared and paid quarterly from the next quarter, and the tax exemption standard of no more than 300000 yuan of quarterly sales is applicable.

If you think it’s too complicated to understand these policies, we could do it for you. 

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