Chinese VAT compliance

There are detailed rules controlling the recording and processing of Chinese activities. These include guidelines on:
  • Chinese invoice requirements (including authorised software for producing invoices);
  • Foreign currency reporting and translation;
  • Credit notes and corrections; and
  • The correct format of accounting records.

What is the tax point for Chinese VAT?

VAT is due on any taxable supply at the earlier of:

  • Payment of the consideration
  • Date invoice issued
  • Date of transfer of ownership/control of goods or completion of service

Record keeping

Chinese accounting records, vouchers, invoices and tax payment supporting documentation must be held for at least 10 years.

Bad Debt Provisions

There is no allowance of non-payment of VAT due by customers.  Businesses are therefore generally reluctant to issue invoices (fapiaos) without simultaneous cash payments.

Reverse charge on imported services

Where a foreign company provides services to a Chinese company, the non-resident supplier is not required to register for Chinese VAT.  The recipient is required to list the sale and purchase in their VAT return, which cancel each other out.  The Chinese customer is required to withhold any VAT due on their consideration.

VAT Groups

VAT Groups, whereby a collection of companies may submit a single, consolidated VAT return, are permitted in China.  This requires special permission, and is only possible if the related companies are located in the same province of China.

Unraveling the mysteries of Chinese VAT

Webinar: Unraveling the mysteries of Chinese VAT

Join Avalara and KPMG as we review China’s VAT system and how it differs to common VAT systems around the world. 

Latest Chinese news

China further 3% VAT cut to 10%

Oct 12, 2019

China is likely to announce this week that it will cut its main standard VAT rate from 13% to 10%. It has already reduced its VAT rate from 16% to 13% on 1 April 2019. China's economy is slowing rapid

China VAT cut to 13% on tariffs concerns

Mar 4, 2019

China is to cut its standard VAT rate from 16%  to 13% in 2019 to help its manufacturers struggling with US tariffs, slowing global demand and a domestic debt overhang.

China raises VAT registration threshold

January 14, 2019

China has raised its VAT registration threshold from 1 January 2019 from CNY30,000 to CNY100,000 for small businesses. The measure is temporary for the next two years.