VAT Taxpayer Status in China and the UK

We talk about VAT taxpayer standing in China and the UK, together with key variations that influence compliance expectations and monetary reporting.

This sequence concentrates on the UK-China enterprise angle. Each week, we are going to add a brand new video that solutions a few of the most continuously requested questions on organising an organization in China and the UK. Every video solutions the identical points from each the China and UK views.

Key insights might be offered by, Maria Kotova, Head of UK and Eire Enterprise Improvement and China market entry director at Dezan Shira & Associates, and Lisa Gui, Assistant Supervisor at HW Fisher.

You probably have any questions on doing enterprise in China or the UK, attain us at UK.Eire@dezshira.com.

Episode 9: VAT taxpayer standing in China and the UK

VAT taxpayer standing in China

VAT is one among two main turnover taxes in China, the opposite being consumption tax. VAT is levied on the gross margin at each level on the provision chain the place worth is added to a taxable services or products. It’s thought-about a impartial tax, permitting taxpayers to offset VAT that has already been paid for the price of supplies used within the product at a earlier stage.

VAT taxpayers are categorized into normal taxpayers and small-scale taxpayers primarily based on their annual taxable gross sales quantity. Taxpayers with annual taxable gross sales exceeding the annual gross sales ceiling (RMB 5 million, approx.US$710,000) set for small-scale taxpayers should apply for normal taxpayer standing. VAT payers whose annual taxable gross sales are beneath the ceiling, in addition to those that have newly established their enterprise, can voluntarily apply for normal taxpayer recognition upon assembly sure situations.

Historically, an organization should get hold of VAT normal taxpayer standing so as to have the ability to subject particular VAT invoices. Nevertheless, ranging from February 1, 2020, China has been permitting all small-scale taxpayers (besides different people) to voluntarily use the VAT bill administrative system to subject the particular VAT bill by themselves, after testing that in a number of pilot applications since 2016.

Small-scale taxpayers are usually topic to a decrease VAT levy charge of three p.c (decreased to at least one p.c throughout the interval between March 1, 2020, and December 31, 2021), as in comparison with charges starting from six to 13 p.c for normal taxpayers, however they can’t credit score enter VAT from output VAT, nor are they entitled to export VAT refunds.

VAT taxpayer standing within the UK

Within the UK there isn’t a have to register for VAT except your small business taxable turnover exceeds £85,000 in any rolling 12-month interval. Nevertheless, VAT could be registered voluntarily earlier than the VAT threshold is reached to keep away from late submitting and registration penalties from HMRC for failing to inform them inside the applicable time interval.

Whether or not VAT is charged or not and at what charges, all is dependent upon the kind of provide of products or companies of the enterprise.

The usual charge of VAT within the UK is presently 20 p.c however there are different VAT charges that apply to sure objects.

See extra from the sequence

Episode 8

Episode 7

Episode 6

Episode 5

Episode 4

Episode 3

Episode 2

Episode 1