(Promulgated by the State Council on December 13, 1993)


Article 1. All units and individuals engaged in the sale of goods, provision of processing, repair and replacement services, and the importation of goods within the territory of the People's Republic of China are taxpayers of Value-added Tax (hereinafter referred to as "taxpayers" ), and shall pay VAT in accordance with these Regulations.


Article 2. VAT rates.


(1) For taxpayers selling or importing goods, other than those stipulated in items (2) and (3) of this Article, the tax rate shall be 17 percent.


(2) For taxpayers selling or importing the following goods, the tax shall be 13 per cent:


i. Food grains, edible vegetable oils;


ii. Tap water, heating, air conditioning, hot water, coal gas, liquefied petroleum gas, natural gas, methane gas, coal/ charcoal products for household use.


iii. Books, newspapers, magazines;


iv. Fees, chemical fertilizer, agricultural chemicals, agricultural machinery and covering plastic film for farming;


v. Other goods as regulated by the State Council.


(3) For taxpayers exporting goods, the tax rate shall be 0 per cent, except as otherwise stipulated by the State Council.


(4) For taxpayers providing processing repairs and replacement services (hereinafter referred to as "taxable service" ), the tax rate shall be 17 per cent. Any adjustments to the tax rates shall be determined by the State Council.


Article 3. For taxpayers dealing in goods or providing taxable services with different tax rates, the sales amounts for goods or taxable services with different tax rates shall be accounted for separately. If the sales amounts have not been accounted for separately, the higher tax rate shall apply.


Article 4. Except as stipulated in Article 13 of these Regulations, for taxpayers engaged in the sale of goods or the provision of taxable services (hereinafter referred to as "selling goods or taxable service"), the tax payable shall be the balance of output tax for the period after deducting the input tax for the period. The formula for computing the tax payable is as follows:


Tax payable equals output tax payable for the period minus input tax for the period.


If the output tax for the period is less than and insufficient to offset against the input tax for the period, the excess input tax can be carried forward for set-off in the following periods.


Article 5. For taxpayers selling goods or taxable services, the output tax shall be the VAT payable calculated based on the sales amounts and the tax rates prescribed in Article 2 of these Regulations and collected from the purchasers. The formula for computing the output tax is as follows:
Output tax equals sales amount times tax rate.


Article 6. The sales amount shall be the total consideration and all other charges receivable from the purchasers by the taxpayer selling goods or taxable services, but excluding the output tax collectible.


The sales amount shall be computed in renminbi. The sales amount of the taxpayer settled in foreign currencies shall be converted into renminbi according to the exchange rate prevailing in the foreign exchange market.


Article 7. Where the price used by the taxpayer in selling goods or taxable services is obviously low and without proper justification, the sales amount shall be determined by the competent tax authorities.


Article 8. For taxpayers who purchase goods or receive taxable services (hereinafter referred to as "purchasing goods or taxable services"), VAT paid or borne shall be the input tax. The amount of input tax that can be credited against the output tax, other than the situations specified in Paragraph 3 of this Article, shall be restricted to the amount of VAT payable as indicated on the following VAT credit document:

(1) VAT indicated in the special VAT invoices obtained from the sellers.


(2) VAT indicated on the tax payment receipts obtained from the customs office.


The creditable input tax for the purchase of tax-exempt agricultural products is calculated as follows:
Input tax equals purchasing price times deduction rate.


Article 9. Where taxpayers purchasing goods or taxable services have not obtained and kept the VAT credit document in accordance with the regulations, or the VAT payable and other relevant items in accordance with the regulations are not indicated on the VAT credit document, no input tax shall be credited against the output tax.


Article 10. Input tax on the following items shall not be credited against the output tax:


(1) Fixed assets purchases;


(2) Goods purchased or taxable services used for non-taxable items;


(3) Goods purchased or taxable services used for tax-exempt items;


(4) Goods purchased or taxable services used for group welfare or personal consumption;


(5) Abnormal losses of goods purchased;


(6) Goods purchased or taxable services consumed in the production of work-in-progress or finished goods which suffer abnormal losses.


Article 11. Small-scale taxpayers engaged in selling goods or taxable services shall use a simplified method for calculating the tax payable. The criteria for small-scale tax payers shall be regulated by the Ministry of Finance.


Article 12. The rate leviable on the small-scale taxpayers selling goods or taxable services shall be 6 per cent.


Any adjustment to the leviable rate shall be determined by the State Council.


Article 13. For small-scale taxpayers selling goods or taxable services, the tax payable shall be calculated based on the sales amount and the leviable rate prescribed in Article 12 of these Regulations. No input tax shall be creditable. The formula for calculating the tax payable is as follows:


Tax payable equals sales amount times leviable rate.

The sales amount shall be determined in accordance with the stipulations of Article 6 and Article 7 of these Regulations.


Article 14. Small-scale taxpayers with sound accounting who can provide accurate taxation information may, upon the approval of the competent tax authorities, not be treated as small-scale taxpayers. The tax payable shall be computed pursuant to the relevant stipulations of these Regulations.


Article 15. For taxpayers importing goods, tax payable shall be computed based on the composite assessable price and the tax rates prescribed in Article 2 of these Regulations. No tax will be credited. The formulas for computing the composite assessable price and the tax payable are as follows:


Composite assessable price equals customs dutiable value plus customs duty plus consumption tax.

Tax payable equals composite assessable price times tax rate.


Article 16. The following items shall be exempt from VAT:


(1) Self-produced agricultural products sold by agricultural producers;


(2) Contraceptive medicines and devices;


(3) Antique books;


(4) Importation of instruments and equipment directly used in scientific research, experiment and education;


(5) Importation of materials and equipment from foreign governments and international organizations as assistance free of charge;


(6) Equipment and machinery required to be imported under contract processing, contract assembly and compensation trade;


(7) Articles imported directly by organizations for the disabled for special use by the disabled;


(8) Sale of goods which have been used by the sellers, except as stipulated in the above paragraph, the VAT exemption and reduction items shall be regulated by the State Council.


Any other districts or departments shall not regulate any tax exemption or reduction items.


Article 17. For taxpayers engaged in tax-exempt or tax-reduced items, the sales amount for tax-exempt or tax-reduced items shall be accounted for separately. If the sales amounts have not been separately accounted for, no exemption or reduction is allowed.


Article 18. For taxpayers whose sales amounts have not reached the VAT minimum threshold stipulated by the Ministry of Finance, the VAT shall be exempt.


Article 19. The time at which a liability to VAT arises is as follows:


(1) For sales of goods or taxable services, it is the date on which the sales sum is received or the documented evidence of right to collect the sales sum is obtained.


(2) For importation of goods, it is the date of import declaration.


Article 20. VAT shall be collected by the tax authorities. VAT on the importation of goods shall be collected by the customs office on behalf of the tax authorities. VAT on self-used articles brought or mailed into China by individuals shall be levied together with customs duty. The detailed measures shall be formulated by the Tariff Policy Committee of the State Council together with the relevant departments.

Article 21. Taxpayers selling goods or taxable services shall issue special VAT invoices to the purchasers. Sales amounts and output tax shall be separately indicated in the special VAT invoices.


Under one of the following situations, the invoice to be issued shall be an ordinary invoice rather than the special VAT invoice:


(1) Sale of goods or taxable services to consumers;


(2) Sale of VAT-exempt goods;


(3) Sale of goods or taxable services by small-scale taxpayers.


Article 22. The place for the payment of VAT is as follows:


(1) Businesses with a fixed establishment shall report and pay tax with the local competent tax authorities where the establishment is located. If the head office and branch are not situated in the same county (or city), they shall report and pay tax separately with their respective local competent tax authorities. The head office may, upon the approval of the State Administration for Taxation of its authorized tax authorities where the head office is located.


(2) Businesses with fixed establishments selling goods in a different county (or city) shall apply for the issuance of an outbound business activities tax administration certificate from the local competent tax authorities where the establishment is located and shall report and pay tax with the local competent tax authorities where the establishment is located. Businesses selling goods and taxable services in a different county (or city) without the outbound business activities tax administration certificate establishment issued by the local competent tax
authorities where the establishment is located, shall report and pay tax with the local competent tax authorities where the sales activities take place. The local competent tax authorities where the establishment is located shall collect the overdue tax which has not been reported and paid to the local competent tax authorities where the sales activities take place.


(3) Business without a fixed base selling goods or taxable services shall report and pay tax with local competent tax authorities where the sales activities take place.


(4) For importation of goods, the importer or his agent shall report and pay tax to the customs office where the imports are declared.


Article 23. The VAT assessable period shall be one day, three days, 10 days, 15 days or one month. The actual assessable period of the taxpayer shall be determined by the competent tax authorities according to the magnitude of the tax payable of the taxpayer; tax that cannot be assessed in the regular period can be assessed on a transaction-by-transaction basis.


Taxpayers that adopt one month as an assessable period shall report and pay tax within 10 days following the end of the period; when five days, 10 days or 15 days is adopted, the tax shall be prepaid within five days following the end of the period and a monthly return shall be filled with any balance of tax due settled within 10 days from the first day of the following month.

Article 24. Taxpayers importing goods shall pay tax within seven days after the issuance of the tax payment certificates by the customs office.


Article 25. Taxpayers exporting goods with the applicable 0 per cent tax rate shall, upon completion of export procedures with the customs office, apply for the tax return on those export goods to the tax authorities on a monthly basis based on such relevant documents as the export declaration document. The detailed measure shall be formulated by the State Administration for Taxation.


Where the return of goods or the withdrawal of the customs declaration occurs after the completion of the tax refund on the export goods, the taxpayer shall repay the tax refunded according to the law.


Article 26. The collection and administration of VAT shall be conducted in accordance with the relevant regulations of the (Law of the People's Republic of China on Tax Collection and Administration) and these Regulations.


Article 27. The collection of VAT from foreign investment enterprises and foreign enterprises shall be conducted in
accordance with the resolutions of the Standing Committee of the National People's Congress.


Article 28. The Ministry of Finance shall be responsible for the interpretation of these Regulations and for the formulation of the Detailed Rules and Regulations for the implementation of these Regulations.


Article 29. These Regulations shall come into effect from January 1, 1994 (The Draft Regulations of the People's Republic of China on Valued-Added Tax) and the Draft Regulations of the People's Republic of China on Product Tax promulgated by the State Council on September 18, 1984 shall be replaced on the same date.