In order to further support the development of small and micro enterprises, the relevant VAT policies are hereby announced as follows:

From April 1, 2022 to December 31, 2022, small-scale value-added tax taxpayers are subject to a 3% taxable sales income and are exempt from value-added tax; prepaid value-added tax items that are subject to a 3% pre-collection rate, Suspension of withholding VAT.

The part related Q & As are as follows:

Q1. Are the sales income of the small-scale taxpayers subject to the 3% levy rate eligible for tax exemption?

A1: Whether a small-scale taxpayer obtains taxable sales income subject to a 3% levy rate is subject to the tax exemption policy, it should be judged according to the time when the taxpayer’s tax liability for obtaining taxable sales income occurs. If the tax liability occurs from April 1 to December 31, 2022, the tax exemption policy can be applied. If the tax liability occurs before March 31, 2022, it shall be implemented in accordance with the previous relevant policies.

Q2. How should a small-scale taxpayer issue an invoice after obtaining the taxable sales income subject to the 3% levy rate and enjoying the tax exemption policy?

A2: Article 21 of the "Interim Regulations of the People’s Republic of China on Value-Added Tax" stipulates that taxpayers shall not issue special VAT invoices if taxable sales are subject to tax-exemption provisions. Accordingly, Article 1 of this Announcement clarifies that small-scale value-added tax taxpayers who obtain taxable sales income subject to a 3% collection rate and enjoy the tax-free policy may issue ordinary tax-exempt invoices, but not special value-added tax invoices.

Q3. Can small-scale taxpayers give up tax exemption and issue special VAT invoices? If it can be issued, at what rate should a special invoice be issued?

A3: According to Article 1 of this announcement, small-scale VAT taxpayers who obtain taxable sales income subject to a 3% collection rate may choose to waive tax exemption and issue special VAT invoices. If the taxpayer chooses to waive tax exemption and issue special VAT invoices for part or all of the taxable sales income, it shall issue a special VAT invoice with a levy rate of 3%, and calculate and pay VAT according to regulations.

Source: General Office of the State Administration of Taxation

24th.Mar.2022