Laws of the People's Republic of China

The State Administration of Taxation

Circular of The State Administration of Taxation Concerning Matters Related to Strengthening the Administration of the Special Bill of Payment of Import VAT and the Invoice of Waste Material

Guo Shui Han[2004]No.128

January 21, 2004

To the national taxation bureaus of all the provinces, autonomous regions and municipalities directly under the State Council and cities with separate plans under the state plan,

In order to crack down the illegal activity of tax evasions by using the Special Bill of Payment of Import VAT and the invoice of waste material, to strengthening the administration and supervision of VAT and to plug the tax leak, the State Administration of Taxation (hereinafter refer to as SAT) promulgate the Measures on audit the Special Bill of Payment of Import VAT and the Measures on audit the invoice of waste materials to you departments now, and the concerning matters are hereby notified as follows:

1.

It is presently an important measure of strengthening the administration of VAT and of plugging tax leaks to strengthen the administration and supervision of the Special Bill of Payment of Import VAT and the invoice of waste material. After the promulgating of this circular, all the bureaus and offices of SAT shall convene the special meeting to assign the tasks, to comprehensively spread the spirit of this circular, to train the competent officials and taxpayers so that the policy can be fully implemented.

2.

In order to meet the need of one-window contrasting of the 4 sorts of non-VAT-invoice including the invoice of waste materials, the custom duty payment certificate, the receipt of primary product purchasing and the invoice of transportation cost, it is decided to alter the content of reporting form specified in the Measure of Tax Declaration of Normal VAT Taxpayers as follows:

(1)

Adjust the column 5 of the Annex II of Tax Return of VAT to " among them: Custom duty payment certificate". This column reflects specifically the deducted purchasing tax amount declared with the custom duty payment certificate according to the laws and regulations of the imported goods of the taxpayers, including the goods of the tax rate of 17% and 13%

(2)

Adjust the column 6 of the Annex II of Tax Return of VAT to "the receipt of primary product purchasing and normal invoice". This column reflects specifically the deducted purchasing tax amount declared with the receipt of primary product purchasing and normal invoice according to the laws and regulations because of the purchasing of the tax-free primary products of the taxpayers.

(3)

Adjust the column 7 of the Annex II of Tax Return of VAT to "the invoice of waste materials". This column reflects specifically the deducted purchasing tax amount declared with the normal invoice according to the laws and regulations because of the purchasing of the waste materials of the taxpayers.

(4)

Adjust the column 8 of the Annex II of Tax Return of VAT to "the invoice of transportation cost". This column reflects specifically the deducted purchasing tax amount declared with the normal invoice of transportation cost according to the laws and regulations because of the purchasing of the taxpayers

3.

The SAT will promulgate the provisions on the matters of information collection, audit and check of the custom duty payment certificate and the invoice of waste material later.

4.

The questions in the course of implement of this circular shall be reported to the national taxation bureau at the provincial level, and then be consulted and reflected to the State Administration of Taxation.

Linkman:

Liu Feng, Office of Invoice Tax Control, Department of Circulation Tax 010-63417700

Gong Bin, Office of audit and evaluation, Department of Circulation Tax 010-63417797

Liu Hao, Office of VAT, Department of Circulation Tax 010-63417705

5.

This circular shall go into effect as of February 1, 2004

Annex I:Measures on Audit of Special Bill of Payment of Import VAT

1.

After getting all the Special Bill of Payment of Import VAT (hereinafter referred to as the custom duty payment certificate) to deduct the VAT, the normal VAT payers shall fill the detailed list of deduct (Appendix I ) one by one according to the custom duty payment certificate, and shall report them with the tax return simultaneously at the time of VAT declaration. The taxpayers are allowed to offer the paper documents of the detailed list of deduct of the custom duty payment certificate only when they declare in February (those who miss the period of declaration shall re-offer after the period of the month), and from March, the taxpayers shall offer the paper documents and the software or other memory medium that record the electronic data of the detailed list of deduct at the same time. The purchasing tax amount shall not be deducted if the mentioned documents are not offered. The very certificate cannot be used to deduct the purchasing tax amount if the detailed list of deduct of the custom duty payment certificate was not filled or not totally filled according to the related regulations.

2.

The information collection software of the detailed list of deduct of custom duty payment certificate shall be unified tapped by the SAT, and shall be freely provided to the taxpayers by the competent tax authority. The national tax bureaus and taxpayers can download the software from the website of the State Administration of Taxation (http://chinatax.gov.cn) after February 25.

3.

The custom duty payment certificate that obtained after February 1, 2004 shall be declared to deduct before the deadline of the first declaration period after 90 days of the obtain of the certificate, and shall not deduct any purchasing tax amount after the deadline. The custom duty payment certificate that obtained before January 31, 2004 must be declared to deduct before the declaration period of May, 2004, and it can not be used to deduct any purchasing tax amount after the period.

4.

The competent tax authority shall do the following audit in the procedure of VAT declaration.

(1)

To audit whether there is data in the column 5 of the Annex II of the VAT Tax Return and to audit the offer of the deduct list if there is any data.

(2)

To audit whether the deduct list of the custom duty payment certificate is fully filled.

(3)

To audit whether the data in the column of Tax amount in the deduct list equals to the data in the column of Tax amount of the custom duty payment certificate in the Annex II of the VAT Tax Return.

The competent tax authority shall demand the taxpayers to re-offer the related documents or to redeclare after amending the related data if it was found out that the taxpayer did not offer the deduct list or there exist problem after the audit.

5.

The normal VAT taxpayers are allowed not to offer the deduct list if they do not obtain the current custom duty payment certificate.

Annex IIMeasures on auditing the invoice of waste materials

1.

The unit managing the recycling of wasted materials (hereinafter refer to as waste-units) shall fill one by one the detailed list of waste materials (hereinafter refer to as the detailed list of making) according to the normal invoices of selling the materials, and shall offer it in accordance with the VAT tax return in the course of VAT declaration. The taxpayers are allowed to offer the paper documents of the detailed list only when they declare in February (those who miss the period of declaration shall re-offer after the period of the month), and from March, the taxpayers shall offer the paper documents and the software or other memory medium that record the electronic data of the deduct list at the same time.

2.

The waste-unit shall tap the finance stamp and the stamp of the invoice maker when they make the normal invoice in the course of selling the waste materials. The normal VAT taxpayers of manufacturing units cannot deduct the purchasing tax amount with the invoice that has no stamp of the invoice maker.

3.

After getting all the invoice of waste materials to deduct the VAT, the normal VAT payers shall fill the deduct bill of invoice of waste materials (appendix 3, hereinafter refer to as the detailed list of deduct) one by one according to the invoice, and shall offer them with the tax return simultaneously at the time of VAT declaration. The taxpayers are allowed to offer the paper documents of the deduct list only when they declare in February (those who miss the period of declaration shall re-offer after the period of the month), and from March, the taxpayers shall offer the paper documents and the software or other memory medium that record the electronic data of the deduct list at the same time. The purchasing tax amount shall not be deducted if the mentioned documents are not offered. The very certificate cannot be used to deduct the purchasing tax amount if the deduct list was not filled or not totally filled according to the related regulations.

4.

The information collection software of the detailed list of deduct and the detail list of making shall be unified tapped by the State Administration of Taxation, and shall be freely provided to the taxpayers by the competent tax authority. The national tax bureaus and taxpayers can download the software from the website of the State Administration of Taxation (http://chinatax.gov.cn) after February 25.

5.

The invoice of waste materials made after March 1, 2004 shall be declared to deduct before the deadline of the first declaration period after 90 days of the making of the invoice, and shall not deduct any purchasing tax amount after the deadline. The invoice of waste materials made before March 1, 2004 must be declared to deduct before the declaration period of June, 2004, and it can not be used to deduct any purchasing tax amount after the period.

6.

The invoice of waste materials without the stamp of invoice maker that made before March 1, 2004 being holding by the manufacturing units is allowed to deduct the purchasing tax amount, and the column of ID of Sell Taxpayer and the column of No. of the Competent Tax Authority of the Sell Taxpayer are allowed not to be filled temporarily.

7.

The detailed list of making and the detailed list of deduct are allowed not to be offered to the competent tax authority in the case of the waste-unit did not make the invoice of waste materials and the normal VAT taxpayers did not obtain the invoice.

8.

The competent tax authority shall do the following audit in the procedure of VAT declaration.

(1)

To audit the declaration of the waste-unit

i.Whether the detailed list of making is fully filled

ii. Whether the data in the item of Total Amount in the column of Invoice Amount in the detailed list of making equals to or less than the data in the item of Saleroom of Tax-free Goods in the column 16 Making Normal Invoice in the Annex I of the VAT tax return

(2)

To audit the declaration of the obtain of the invoice of waste materials

i. Whether there is data in the column 7 Invoice of waste materials and whether offer the detailed list of deduct if there is data

ii. Whether the detailed list of deduct is fully filled

iii. whether the data in the column of Invoice Amount and column of Deduct Tax Amount is equals to the data In the column 7 Invoice of waste materials of the Annex II of VAT tax return

The competent tax authority shall demand the taxpayers to re-offer the related documents or to re- declare after amending the related data if it was found out that the taxpayer did not offer the detailed list of making and the detailed list of deduct or there exist problem after the audit.

9.

The waste-unit that be proved to falsely making the invoice of waste materials will not apply the policy of exempt VAT, and will be punished by the competent tax authority in accordance with the related laws and regulations.

Annex: the sample of the stamp of invoice maker (omitted)