VAT status in China crucial for pre-incorporation financial planning, especially for SMEs
Aug. 27 – One factor to consider when calculating the overall cost of China’s recent VAT reform is whether or not a company should become a general taxpayer or remain a small-scale taxpayer.
Although the VAT rate for small-scale taxpayers is much lower than that for general taxpayers – 3 percent instead of 17 percent (or 13 percent for the import of specific goods) – obtaining the general taxpayer status is still beneficial for companies with considerable annual business turnover, because the status will allow genuinely cost-effective operations by:
- Allowing companies to deduct the input VAT from output VAT; and
- Increasing companies’ range of potential clientele as well as credibility by allowing them to issue VAT receipts (fapiao).
In this article, we discuss three questions about VAT general taxpayer status, namely:
- How do you qualify to be a VAT general taxpayer?
- What is the process to become a VAT general taxpayer?
- How can you keep your customers happy during the probation period?
