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Tax Connect Flash | China tax regulation update

14/10/2011

VAT invoices which have not been verified within the stipulated period

Circular number: SAT Announcement [2011] No. 50
Issuance date: 2011-9-14
Effective date: 2011-10-1

In the September edition, we mentioned the SAT Announcement [2011] No. 49 which abolished the former treatment of VAT invoices that failed to be verified within the stipulated period. On 14 September 2011, the SAT issued this separate Announcement which partially allows crediting of VAT invoices obtained after 1 January 2007 but failed to be verified within the required time period. According to the Announcement, if the VAT invoices were obtained based on real transactions, but failed to be verified within the required period due to certain objective reasons, the relevant VAT invoices can still be credited after being reviewed by the competent tax authority and verified by the SAT. The objective reasons tolerated by the tax authorities are listed in Article 2 of the Announcement, and the procedures to "revive" these invoices are described in the Management Measures attached to the Announcement.
Enterprises with overdue unverified VAT invoices obtained after 1 January 2007 are strongly recommended to check the detailed rules set out by the Announcement, and, if possible, take actions to make the "lapsed" input VAT creditable again.

Corporate Income Tax ("CIT") preferential treatment on incomes earned from projects of agriculture, forestry, animal husbandry and fisheries

Circular number: SAT Announcement [2011] No. 48
Issuance date: 2011-9-13
Effective date: 2011-1-1

Under the PRC CIT Law and its Implementing Rules, CIT exemption or reduction applies to income earned by enterprises from projects of agriculture, forestry, animal husbandry and fisheries. The SAT issued this Announcement to provide more detailed rules regarding the scope and conditions for the above tax incentive purposes.

Tax treatment on income from interests on local government bonds

Circular number: Circular Caishui [2011] No. 76
Issuance date: 2011-8-26
Effective date: 2011-8-26

According to the Circular, interest income earned by enterprises and individuals from local government bonds issued in 2009, 2010, and 2011 shall be exempted from CIT or Individual Income Tax. For the above purpose, local government bonds refer to the bonds issued and repaid by provincial-level governments with permission from the State Council.


Contact

Charlie Sun
Head of Tax Practice - CMS, China