The scope of VAT taxation is quite broad, basically covering most of the business in economic activities, but there are still some businesses that are not taxable by VAT. Today, we will make a summary of the non-taxable items of VAT.
I divide the non-taxable items into 3 categories and 55 items
The first category: There are documents that clearly stipulate that VAT is not levied, but non-taxable invoices cannot be issued. According to my statistics, it is 32 items.
The second category: There are documents that clearly stipulate that VAT is not levied and non-taxable invoices can be issued, which is 16 so far.
The third category is items that are not clearly stipulated in the document, but can be judged to be not within the scope of VAT taxation according to the existing policy provisions, I have listed 7 common items, welcome to continue to add.
1. Situations where VAT is not levied and non-taxable invoices cannot be issued
1. Collect and pay consumption tax. Consumption tax collected and paid on behalf of consumer goods entrusted with the processing of consumption tax is not subject to value-added tax. (Article 12 of the Detailed Rules for the Implementation of the Interim Regulations of the People's Republic of China on Value Added Tax) 2. Insurance premium, vehicle purchase tax, vehicle license fee collected. Insurance premiums collected from the purchaser for insurance at the same time as the sale of goods, as well as vehicle purchase taxes and vehicle license plate fees paid on behalf of the purchaser from the purchaser. (Article 12 of the Detailed Rules for the Implementation of the Interim Regulations of the People's Republic of China on Value Added Tax) 3. Cover the transportation costs. At the same time, the following conditions are met for transportation costs: 1. The transportation cost invoice of the carrier department is issued to the buyer; 2. The taxpayer forwards the invoice to the purchaser. (Article 12 of the Detailed Rules for the Implementation of the Interim Regulations of the People's Republic of China on Value Added Tax) 4. Supply or exploitation of natural water. VAT is not levied on the supply or extraction of unprocessed natural water (e.g. reservoirs for agricultural irrigation, factories extracting groundwater for production). (Guo Shui Fa [1993] No. 154) 5. Prefabricated components manufactured on the construction site. Where prefabricated cement components, other components or building materials produced by factories or workshops attached to capital construction units and enterprises engaged in construction and installation business are used in the construction projects of the unit or enterprise, value-added tax shall be levied at the time of transfer for use. However, VAT shall not be levied on the prefabricated components manufactured at the construction site that are directly used in the construction projects of the unit or enterprise. (Guo Shui Fa [1993] No. 154) 6. Purchase of goods. VAT shall not be levied if the following conditions are met at the same time; VAT shall be levied regardless of the accounting system if the following conditions are not met: (1) the entrusted party does not advance funds; (2) the seller issues the invoice to the entrusting party, and the entrusted party forwards the invoice to the entrusting party; (3) the entrusted party settles the loan with the entrusting party according to the actual sales amount and value-added tax amount collected by the seller (or the value-added tax amount levied by the customs in the case of imported goods as an agent), and charges a separate handling fee. (Cai Shui Zi [1994] No. 026) 7. Fine-enforcement departments and units investigate and deal with confiscated items auctioned. Where the commodities investigated and handled by the fine-enforcement departments and units that belong to the general commercial sector meet the conditions for auction, they shall be publicly auctioned after the consent of the fine-enforcement department or the financial department at the same level of the unit. The auction income shall be paid to the treasury by the fine-enforcing department and unit as the income from fines and forfeitures, and shall not be taxed. Where a business unit purchases auctioned items for resale, value-added tax shall be levied in accordance with the regulations. (Cai Shui Zi [1995] No. 69) 8. Licensing costs. No value-added tax shall be levied on income from the cost of work obtained from licenses, photographs and relevant certificates issued by the State administration in the exercise of its management functions. (Guo Shui Han Fa [1995] No. 288) 9. Power supply project subsidy. The subsidy for power supply works does not fall within the scope of VAT sales of goods and the collection of extra-price charges, and should not be subject to VAT. (Cai Shui Zi [1997] No. 102) Power supply project subsidy refers to the general term for the construction and transformation of external power supply projects of 110 kV and below when the user applies for electricity or increases the power capacity, including the two parts of power supply and distribution subsidy. 10. Free vaccination. VAT is not levied on the free vaccinations allocated or distributed by health and epidemic prevention stations and borne by the government. (Guo Shui Han [1999] No. 191) 11. Refined oil is blended across counties and cities. VAT shall not be levied on refined oil sales units that have unified accounting and have been approved by the tax authorities to pay VAT in a consolidated manner and allocate refined oil across counties and cities. (SAT Order No. 2) (May 1, 2002) 12. Financial subsidies for power generation. The power generation subsidies obtained by each oil-fired power plant from the special government financial account are not specified extra-price expenses, are not included in the taxable sales, and are not subject to value-added tax. (Guo Shui Han [2006] No. 1235) 13. Telecommunications units providing telecommunications services incidental to gifts in kind (including gifts of users' SIM cards, mobile phones or valuable items and other goods) carried out by the mainland subsidiary of China Mobile Co., Ltd. are acts of telecommunications units providing telecommunications services in kind while providing telecommunications services, and in accordance with the current turnover tax policy, no value-added tax is levied, and its input tax shall not be deducted. (Guo Shui Han [2006] No. 1278) The business of giving away goods incidentally to business sales by China Telecom subsidiaries (including gifting users PHS<手机>, telephones, SIM cards, network terminals or valuable items, etc.) is an act of telecommunications units providing telecommunications services in kind at the same time, and according to the current turnover tax policy, VAT is not levied, and its input tax shall not be deducted. (Guo Shui Han [2007] No. 414) China Unicom Co., Ltd. and its subsidiaries and Guizhou Branch of China United Communications Co., Ltd. carry out business sales incidental gifts in kind (including gifting users' mobile phone identification cards, mobile phones, telecommunications terminals or valuable items, etc.), which is an act of telecommunications units providing telecommunications services in kind at the same time, and according to the current turnover tax policy, no value-added tax is levied, and its input tax shall not be deducted. (Guo Shui Han [2007] No. 778) 14. Entrusted agent to sell used cars. Taxpayers entrusted with the sale of second-hand cars are not subject to value-added tax if they meet the following conditions at the same time; VAT is levied on sales if the following conditions are not met at the same time. (1) The entrusted party does not advance the payment to the entrusting party; (2) the entrusting party issues the "Uniform Invoice for Second-hand Car Sales" directly to the buyer; (3) The entrusted party settles the payment with the entrusting party according to the actual price and value-added tax amount paid by the buyer (or the value-added tax amount levied by the customs in the case of imported and sold goods as an agent), and charges a handling fee. (SAT Announcement No. 23 of 2012) 15. Give patients the same innovative drugs that are used free of charge in the future. The sales volume of self-produced innovative drugs sold by pharmaceutical manufacturers is the full price and out-of-price fees charged to the buyer, and the same innovative drugs provided to patients free of charge thereafter are not within the scope of VAT. (Cai Shui [2015] No. 4) 16. Sales of services or intangible assets occurring overseas. Article 13: The following circumstances are not sales of services or intangible assets within China: (1) Overseas units or individuals selling services wholly overseas to domestic units or individuals. (2) Overseas units or individuals selling intangible assets that are used entirely overseas to domestic units or individuals. (3) Overseas units or individuals leasing tangible movable property that is entirely used abroad to domestic units or individuals. (4) Other circumstances provided for by the Ministry of Finance and the State Administration of Taxation. (Cai Shui [2016] No. 36 Annex 1)
The following acts of overseas units or individuals are not considered to be domestic sales of services or intangible assets: (1) postal services, collection and dispatch services provided overseas for outbound mail or parcels; (2) Construction services and project supervision services provided to domestic units or individuals at the construction site abroad; (3) Engineering prospecting and prospecting services for engineering or mineral resources provided to domestic units or individuals abroad; (4) Conference and exhibition services provided to domestic units or individuals where the conference and exhibition locations are overseas. (SAT Announcement No. 53 of 2016) 17. Special maintenance funds for residential buildings. Residential special maintenance funds collected by real estate authorities or their designated institutions, provident fund management centers, development enterprises and property management units are not subject to VAT. (Cai Shui [2016] No. 36 Annex 2) 18. Units and employees provide mutual services. Sales of services, intangible assets or immovable property refers to the provision of services or the transfer of intangible assets or immovable property for a fee, except for the following non-business activities: (1) Employees employed by units or individual industrial and commercial enterprises provide services for obtaining wages for the unit or employer. (2) Units or individual industrial and commercial enterprises provide services to the employees they employ. (Cai Shui [2016] No. 36 Annex 1) 19. Deposit interest deposit. Interest is not subject to VAT (Annex 2 of Cai Shui [2016] No. 36)20. Insurance compensation. The insurance benefits received by the insured are not subject to VAT. (Cai Shui [2016] No. 36 Annex 2) 21. Securities settlement risk funds and collection and payment funds. Sales of China Securities Depository and Clearing Corporation do not include the following fund items: securities settlement risk funds withdrawn according to regulations; Interest on the default advance funds of securities companies that are collected and paid on behalf of them; During the settlement process, the funds collected and paid on behalf of the funds are subject to default penalty interest. (Cai Shui [2016] No. 39)
22. Collection and payment of human resources outsourcing services. Taxpayers who provide human resources outsourcing services and pay value-added tax according to brokerage agency services, their sales do not include the wages paid to the employees of the customer unit entrusted by the client unit and the social insurance and housing provident fund paid by the agent. (Cai Shui [2016] No. 47) 23. Public welfare donations. China Mobile Communications Corporation, China United Network Communications Group Co., Ltd., China Telecom Group Corporation and their member units accept donations as public welfare organizations through mobile phone SMS public welfare special service number (see Annex 1 for the list), and the balance after deducting donations paid to public welfare organizations is sales by all the prices and out-of-money expenses obtained. Special VAT invoices shall not be issued for donations accepted by them. (Cai Shui [2016] No. 39) 24. The state directive free transportation services. Railway transportation services and air transport services provided free of charge in accordance with national directives are services used for public welfare undertakings as stipulated in Article 14 of the Pilot Implementation Measures. (Annex 2 of Cai Shui [2016] No. 36) 25. Government funds and administrative fees. Sales of services, intangible assets or immovable property refer to the provision of services for a fee, the transfer of intangible assets or immovable property for a fee, except for the following non-business activities (Article 10 of Annex 1 of Cai Shui [2016] No. 36): Government funds or administrative fees collected by administrative units that meet the following conditions. (1) Government funds approved by the State Council or the Ministry of Finance and administrative fees set up with the approval of the State Council or provincial-level people's governments and their competent departments for finance and pricing; (2) Issuing fiscal bills supervised (printing) by financial departments at or above the provincial level (including the provincial level) at the time of collection; (3) The full amount of the money received is handed over to the treasury. 26. Airport construction fees. The sales of air transport enterprises do not include airport construction fees collected on their behalf. (Cai Shui [2016] No. 36 Annex 2) 27.Business tax is levied on membership fee income before the VAT reform of associations, and VAT is not levied, and membership fee income after the VAT reform is subject to value-added tax unless otherwise specified. All political parties, the Communist Youth League, trade unions, women's federations, the China Association for Science and Technology, the Youth Federation, the Taiwan Federation and the Federation of Returned Overseas Chinese collect party fees, league fees, and membership dues, as well as membership dues collected by intergovernmental international organizations, which are non-business activities and are not subject to value-added tax. (Cai Shui [2016] No. 68) Since May 1, 2016, membership fees collected by social groups are exempt from VAT. (Cai Shui [2017] No. 90) Social groups refer to non-profit legal persons established or registered in accordance with relevant national laws and regulations and obtained the Certificate of Registration of Social Group Legal Persons. Membership dues refer to the membership dues collected by social groups from individual members, unit members and group members within the scope permitted by national laws, regulations and policies, and in accordance with the provisions of the articles of association. All other income obtained by Social Groups from carrying out business and service activities shall be subject to value-added tax in accordance with regulations. 28. Visa fee, certification fee. The taxpayer provides visa agency services to obtain all the price and extra-price fees, and the balance after deducting the visa fees and authentication fees collected from the service recipient and paid to the Ministry of Foreign Affairs and foreign embassies (consulates) in China on behalf of the taxpayer is the sales amount. Visa fees and certification fees collected from and paid on behalf of the service recipient shall not be subject to special VAT invoices, and ordinary VAT invoices may be issued. (SAT Announcement No. 69 of 2016) 29. Examination fees for overseas units. If an overseas entity conducts examinations in China through the examination center of the Ministry of Education and its directly subordinate units, the examination center of the Ministry of Education and its directly subordinate units shall use the balance of the examination fee income obtained after deducting the examination fee paid to the overseas unit as sales, and pay value-added tax according to the provision of "educational auxiliary services"; VAT is withheld uniformly on examination fees collected and paid to overseas entities. The examination center of the Ministry of Education and its directly subordinate units shall not issue special VAT invoices for examination fees collected and paid to overseas units on their behalf, but may issue ordinary VAT invoices. (SAT Announcement No. 69 of 2016) 30. Rent-free period for renting immovable property. If a taxpayer leases immovable property and stipulates a rent-free period in the lease contract, it is not deemed to be a sales service as stipulated in Article 14 of the Implementation Measures for the Pilot Project of Replacing Business Tax with Value-added Tax (issued in Cai Shui [2016] No. 36). (SAT Announcement No. 86 of 2016) 31.Non-principal protected income of financial instruments. The term "principal preservation income, remuneration, capital occupancy fee, and compensation" referred to in point 1 of Article 1 (5) of the Notes on Sales Services, Intangible Assets and Real Estate refers to the investment income that is expressly promised in the contract that the principal at maturity can be fully recovered. The above-mentioned non-capital protected income obtained during the holding period (including maturity) of financial instruments is not interest or interest income and is not subject to VAT. (Cai Shui [2016] No. 140) 32. Asset management products held to maturity. Taxpayers who purchase various asset management products such as funds, trusts, wealth management products and hold them until maturity do not belong to the transfer of financial products as referred to in point 4 of Article 1 (5) of the Notes on Sales Services, Intangible Assets and Real Estate (Cai Shui [2016] No. 36). (Cai Shui [2016] No. 140) II. Circumstances in which VAT is not levied and non-taxable invoices are issued 1. Prepaid card sales and recharge (non-taxable invoices 601) Single-purpose card issuers or card sales enterprises sell single-purpose cards, or accept pre-received funds obtained by recharging single-purpose card holders, and do not pay VAT. Payment institutions that sell RMB equivalent funds obtained from multi-purpose cards, or accept recharge funds obtained by multi-purpose card holders, do not pay VAT. (SAT Announcement No. 53 of 2016). 2. Advance receipts for the sale of self-developed real estate projects (issuance of non-taxable invoices 602) Real estate development enterprises that sell the developed real estate projects by way of advance receipts shall pay VAT in advance at a pre-levy rate of 3% when receiving advance receipts. (Cai Shui [2016] No. 36 Annex 2) 3. Taxpayers who have declared and paid business tax without issuing invoices and issuing supplementary invoices (issuing non-taxable invoices 603) Taxpayers who have declared and paid business tax before May 1, 2016, including businesses that have declared and paid business tax or paid business tax, and need to issue supplementary invoices, can issue VAT ordinary invoices. Taxpayers should retain all relevant information for reference. (Article 7 of SAT Announcement No. 42 of 2018) 4. Stamp duty collected (issuance of non-taxable invoices 604) Article 9, Item 11 of SAT Announcement No. 53 of 2016, classification code 6 in the SAT Announcement No. 45 of 2017 "Non-taxable items without sales". When issuing a VAT invoice using the code "Non-taxable items that have not been sold", the invoice tax rate column should be filled in "Non-taxable", and no special VAT invoice should be issued. The SAMR may entrust banking, insurance, industry and commerce, real estate management and other relevant departments to collect stamp duty on loan contracts, property insurance contracts, rights licenses, property rights transfer documents, construction project contracts, etc. In the work of entrusting tax collection, tax receipts shall be issued to taxpayers when collecting taxes on behalf of the collector. (SAT Announcement No. 77 of 2016, Article 18, SAT Announcement No. 24 of 2013) 5. Collection of vehicle and vessel tax (issuance of non-taxable invoice 605) From May 1, 2016, insurance institutions, as vehicle and vessel tax withholding agents, should indicate the information of vehicle and vessel tax collection in the remarks column of the VAT invoice when issuing VAT invoices. Specifically, it includes: insurance policy number, tax period (detailed to month), vehicle and vessel tax collection, late payment fee, total, etc. This VAT invoice can be used as the original accounting document for the payment of vehicle and vessel taxes and late payment fees. (SAT Announcement No. 51 of 2016) 6. Sale of assets by the lessee of the financing sale and leaseback (issuance of non-taxable invoices 606) The sale of assets by the lessee in the financing sale and leaseback business does not fall within the scope of VAT and business tax collection and is not subject to VAT. Financing sale-leaseback business refers to the act of the lessee selling assets to an enterprise approved to engage in financial leasing business for financing purposes, and then leasing back the assets from the financial leasing enterprise. When the lessee sells an asset in a financing sale-leaseback business, the ownership of the asset and all the rewards and risks associated with the ownership of the asset are not fully transferred. (SAT Announcement No. 13 of 2010) 7. In the process of asset restructuring, all or part of the physical assets and their associated claims, liabilities and labor are transferred to other units and individuals through merger, division, sale, replacement, etc., and the transfer of real estate and land use rights involved is not subject to VAT. (Annex 2 of Cai Shui [2016] No. 36) In the process of enterprise restructuring, an enterprise transfers all or part of its physical assets and associated claims, liabilities and labor to other units and individuals through merger, division, sale, replacement, etc., and the transfer of goods, immovable property and land use rights involved in it is not subject to value-added tax if it meets the regulations. (Cai Shui [2016] No. 125) 8. In the process of asset restructuring, all or part of the physical assets and their associated claims, liabilities and labor are transferred to other units and individuals through merger, division, sale, replacement, etc., and the transfer of real estate and land use rights involved is not subject to VAT. (Annex 2 of Cai Shui [2016] No. 36) In the process of enterprise restructuring, an enterprise transfers all or part of its physical assets and associated claims, liabilities and labor to other units and individuals through merger, division, sale, replacement, etc., and the transfer of goods, immovable property and land use rights involved in it is not subject to value-added tax if it meets the regulations. (Cai Shui [2016] No. 125) 9. Acting as an agent for the import of duty-free goods (issuance of non-taxable invoice 609) The taxpayer acts as an agent for the import of goods exempt from import VAT according to regulations, and its sales volume does not include the payment collected from the entrusting party and paid on behalf of the entrusting party. (SAT Announcement No. 69 of 2016) 10. Prize invoice bonus payment (issuance of non-taxable invoice 610) policy basis: General Letter of Taxation [2017] No. 158 11. Water fee revenue during the pilot period of water resources fee to tax conversion (issuance of non-tax invoice 611) In pilot provinces where urban public water supply water users were originally levied water resource fees in addition to the basic water price (tap water price), during the pilot period of water resources fee to tax conversion, in accordance with the principle of not increasing the burden on urban public water supply enterprises, The water fee income corresponding to the water resource tax paid by urban public water supply enterprises is not subject to value-added tax, and ordinary VAT invoices are issued according to the "tap water without taxation" project. (SAT Announcement No. 47 [2017]) 12. Advance receipts for construction services (issuance of non-taxable invoices 612) Taxpayers who provide construction services to obtain advance receipts should pay VAT in advance at the prescribed pre-levy rate with the balance of the obtained advance receipts after deducting the subcontracting payments paid. For projects that are subject to VAT in advance at the place where the construction services take place under the current regulations, the taxpayer receives the advance payment of VAT at the place where the construction services are taking place. For projects that are not required to pay VAT in the place where the construction services take place under the current regulations, the taxpayer receives the advance payment of VAT at the location of the establishment. (Cai Shui [2017] No. 58) 13. Collection of Civil Aviation Development Fund (Issue Non-taxable Invoice 613) The Civil Aviation Development Fund is a government fund, and the revenue is handed over to the central treasury, included in the budget of the government fund, and earmarked for special purposes. Article 15 stipulates that the civil aviation development fund payable by air passengers shall be collected by airlines or sales agencies when passengers purchase tickets. The itinerary of civil aviation tickets issued by airlines or sales agencies shall separately list the civil aviation development fund collected on behalf of the airline, and overprint the fiscal bill supervision and production seal of the Ministry of Finance. (Cai Quan [2012] No. 17 Article 3) 14. If the auction house entrusts the auction house to auction cultural relics and artworks to collect the payment (issuing a non-taxable invoice 614) If the auction house entrusts the auction house to auction cultural relics and works of art, and the entrusting party enjoys the VAT exemption policy according to the regulations, the auction house may issue a general VAT invoice to the buyer in its own name for the price of the goods collected on behalf of the auction house, and the corresponding price of the goods shall not be included in the auction house's VAT taxable income. (SAT Announcement No. 9 of 2020) 15. Financial subsidy income not linked to sales (issuance of non-taxable invoices 615) From January 1, 2020, taxpayers who obtain financial subsidy income that is directly linked to their income or quantity from the sale of goods, services, services, intangible assets and immovable property shall be calculated and paid value-added tax according to regulations. The financial subsidy income obtained by taxpayers in other circumstances is not VAT taxable income and is not subject to VAT. (SAT Announcement No. 45 of 2019) 16. Asset restructuring involving the transfer of goods (issuance of non-taxable invoices616) In the process of asset restructuring, taxpayers transfer all or part of their physical assets and their associated claims, liabilities and labor to other units and individuals through merger, division, sale, replacement, etc., which is not within the scope of VAT taxation, and the transfer of goods involved in it is not subject to VAT. (SAT Announcement No. 13 [2011]) In the process of asset restructuring, taxpayers who transfer all or part of their physical assets and their associated claims and liabilities through merger, division, sale, replacement, etc., and the ultimate transferee and labor recipient are the same unit or individual, the relevant provisions of the Announcement of the State Administration of Taxation on VAT Issues Related to Taxpayers' Asset Restructuring (SAT Announcement No. 13 [2011]) shall still apply. None of the multiple transfers of goods are subject to VAT. (SAT Announcement No. 66 of 2013) Taxpayers are not allowed to issue special VAT invoices for the sale of tax-exempt goods. In view of the fact that the physical assets invested by the debt-for-equity swap enterprise into the new company enjoy the VAT exemption policy, the debt-to-equity swap enterprise shall not issue special VAT invoices when it invests its physical assets in the new company. (Guo Shui Han [2003] No. 1394) III. Common non-VAT taxable items are subject to the scope of VAT taxation and the provisions on deemed sales, It can be deduced that the following items are not subject to VAT: 1. The unit or individual industrial and commercial enterprise provides services to public welfare undertakings or the public free of charge, which is not VAT, which is regarded as a sale2. The services provided by natural persons are provided free of charge, which is not regarded as sales of VAT3. The unit or individual transfers intangible assets or immovable property for public welfare undertakings or the public free of charge, which is not regarded as sales of VAT4. Natural persons use goods as investment and provide them to other units or individual industrial and commercial enterprises, which are not VAT, which are regarded as sales of goods5. Income from equity transfer, which does not fall within the scope of VAT taxation6. Equity investment dividends do not fall within the scope of VAT taxation7. No taxable acts occur , and the liquidated damages obtained are not taxable within the scope of VAT
—END—Jingjingliang's tax month collation, policy basis from Xiaoying Yan Tax Summary of 46 VAT non-taxable behaviors and their policy basis (20230529 updated)
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————— cover picture comes from the public account: the picture is divided into Z photographer Gu Boqun authorized the use of this number