Sorting out the simple tax collection policy for the construction and installation industry

VAT: A simplified tax policy for the construction and installation industry

(A material supply/prefabricated house/self-produced equipment/construction services/contractor)

Policy Papers

Article 2 (3) of Annex 2 of the Cai Shui [2016] No. 36 "Provisions on Matters Concerning the Pilot Program of Replacing Business Tax with Value-Added Tax" stipulates that a six-sale act is a mixed sale if it involves both goods and services. Units engaged in the production, wholesale or retail of goods and individual industrial and commercial households shall pay VAT according to the sales of goods; The mixed sales of other units and individual industrial and commercial households shall be subject to VAT according to the sales services.

Article 1 of the Announcement No. 11 of 2017 of the State Administration of Taxation stipulates that the provision of construction and installation services by taxpayers while selling self-produced goods such as prefabricated houses, machinery and equipment, and steel structure parts does not belong to mixed sales, and the sales of goods and construction services shall be accounted for separately, and different tax rates or levy rates shall be applied respectively.

Article 6 of the Announcement No. 42 of the State Administration of Taxation stipulates that if a general taxpayer sells self-produced machinery and equipment and provides installation services at the same time, the sales amount of machinery and equipment and installation services shall be calculated separately, and the installation services can be taxed according to the simple tax calculation method selected by Project A.

If a general taxpayer sells purchased machinery and equipment and provides installation services at the same time, if the sales of machinery and equipment and installation services have been calculated separately in accordance with the relevant provisions of the concurrent operation, the installation services can be calculated according to the simple tax calculation method selected by the first project.

Annex 2 of the "CS [2016] No. 36): Paragraph 7 of Article 1 of the "Provisions on Relevant Matters Concerning the Pilot Project of Replacing Business Tax with Value-Added Tax" stipulates that: 2. General taxpayers can choose to apply the simplified tax calculation method for the construction services provided by the project A.

A supply project refers to a construction project in which all or part of the equipment, materials and power are purchased by the project employer.

Article 1 of the "Cai Shui [2017] No. 58) stipulates that: "If the general contractor of a construction project provides engineering services for the foundation and foundation and main structure of the housing construction, and the construction unit purchases all or part of the steel, concrete, masonry materials and prefabricated components by itself, the simplified tax calculation method shall be applied." ”

According to Annex 2 of the "Cai Shui [2016] No. 36) "Provisions on Relevant Matters Concerning the Pilot Project of Replacing Business Tax with Value-Added Tax", general taxpayers can "choose" to apply the simplified tax calculation method for construction services provided by clearing contractors. The provision of construction services in the form of a contractor refers to the construction services in which the construction party does not purchase the materials required for the construction project or only purchases auxiliary materials, and collects labor costs, management fees or other fees.

summary

If the goods are equipment:

"Self-produced equipment + installation" business: Taxpayers should separately account for the sales of equipment and installation services, and calculate taxes separately, with the applicable tax rate of 13% for the sales of equipment business (9% for special examples, agricultural machinery and equipment), and the applicable tax rate of 9% for installation services, or 3% for simple tax calculation, but the input tax corresponding to simple tax calculation shall not be deducted. If it is not accounted for separately, VAT will need to be paid at the higher applicable rate.

"Purchased equipment + installation" business: If the enterprise has been separately accounted for according to the concurrent operation, it can be taxed separately, and the VAT calculation method is the same as that of "self-produced equipment + installation". However, if the business of "purchased equipment + installation" is not accounted for separately, it shall be treated according to the provisions of "mixed sales", and if the taxpayer takes the sale of goods as its main business, it shall pay VAT according to the applicable tax rate (13% or 9%) for the sale of goods; If the main business is installation services, VAT will be paid according to the installation services, with a general tax rate of 9% and a simple tax collection rate of 3%. Therefore, in practice, we can carry out tax planning according to the situation of the enterprise.

If the goods are related to construction and installation other than equipment:

"Self-produced goods + installation" business: should be accounted for separately, separate tax, the applicable tax rate for sales of goods is 13%, the applicable tax rate for installation services is 9%, there is no provision for simple tax calculation. If it is not accounted for separately, VAT will need to be paid at the higher applicable rate.

"Purchased goods + installation" business: It shall be handled in accordance with the "mixed sales regulations", and the applicable tax rate or levy rate of the enterprise's main business shall be used to calculate and pay VAT.

Segment your content

If the sale of self-produced goods such as prefabricated houses is provided at the same time as construction and installation, it needs to be accounted for separately and different tax rates apply. If the sale is doors, windows, etc., and it is purchased, then it is a mixed sale.

Article 1 of the Announcement No. 11 of 2017 of the State Administration of Taxation, hereinafter referred to as Document No. 11 of the Announcement of the State Administration of Taxation in 2017 stipulates that the provision of construction and installation services by taxpayers while selling self-produced goods such as prefabricated houses, machinery and equipment, and steel structure parts does not belong to the mixed sales stipulated in Article 40 of the Law (issued by Document No. 36 of the Finance and Taxation [2016]).

The above-mentioned provisions exclude the "self-produced goods + construction and installation services" model from mixed sales, and require taxpayers to account for the sales of goods and construction and installation services separately, so that the corresponding tax rates can be applied to the sales of goods and the provision of construction and installation services respectively.

Case: A door and window manufacturer is a general VAT taxpayer.

On June 23, 2022, a contract was signed with B Real Estate Development Company for the installation of doors and windows in residential areas. The contract stipulates that the price of installing doors and windows in the room is 8 million yuan, including 7.5 million yuan for doors and windows, and the installation fee is 500,000 yuan; The price of the anti-theft door for the installation of the unit building door is 300,000 yuan, of which the price of the anti-theft door is 250,000 yuan, and the installation fee is 50,000 yuan.

The doors and windows of the living room are produced by the A door and window production enterprise, the cost is 5 million yuan, and the cost of installing the doors and windows of the living room is 400,000 yuan. The anti-theft door is purchased by the enterprise, and the special VAT invoice obtained indicates that the price is 200,000 yuan, the value-added tax is 26,000 yuan, and the cost of installing the anti-theft door is 30,000 yuan. (Note: The contract price is tax-included)

1. Accounting and tax treatment of installing doors and windows in the room

(1) Tax treatment

Article 1 of the Announcement No. 11 of 2017 of the State Administration of Taxation, hereinafter referred to as Document No. 11 of the State Administration of Taxation in 2017) stipulates that the provision of construction and installation services by taxpayers while selling self-produced goods such as prefabricated houses, machinery and equipment, and steel structural parts does not belong to the mixed sales stipulated in Article 40 of the "(Cai Shui [2016] No. 36 Document), and the sales of goods and construction services shall be accounted for separately, and different tax rates or levy rates shall be applied respectively.

From the above policy provisions, it can be seen that the sales of self-produced doors and windows and the provision of installation services by A door and window manufacturers are not mixed sales, and should be taxed like concurrent operations, that is, the sales of doors and windows and the sales of installation services should be accounted for respectively, and the tax rate of 13% and 9% respectively should be applied to calculate VAT.

(2) Accounting treatment

(1) Accounting treatment of sales doors and windows

The sales revenue from the sale of doors and windows was 750÷ (1÷13%) = 663.72 (10,000 yuan), and the output VAT was 750÷ (1÷13%)× 13% = 86.28 (10,000 yuan). (Unit: 10,000 yuan, the same below)

(1) When sales revenue is obtained:

Borrow: Bank deposit 750

Credit: main business income 663.72

Tax payable – VAT payable (output tax) 86.28

(2) When carrying forward the cost of sales:

Borrow: Cost of main business 500

Credit: 500 items in stock

(2) Accounting treatment of installed doors and windows

(1) In the event of contract costs:

Borrow: Engineering construction – contract cost 40

Credit: Employee Compensation Payable 40

(2) When the contract price is received:

Debit: Bank deposit 50

Credit: Project Settlement 50

(3) The sales revenue from the installation of doors and windows is 50÷ (1÷9%) = 45.87 (10,000 yuan), the output VAT tax is 50÷ (1÷9%)×9% = 4.13 (10,000 yuan), and the gross profit of the contract is 50-40 = 10 (10,000 yuan).

When revenue, expenses and contract gross profit are recognized:

Borrow: Engineering Construction - Contract Gross Profit 10

Cost of Principal Sales 40

Credit: main business income 45.87

Tax payable – VAT payable (output tax) 4.13

(4) After the completion of the installation project, the balance of the "Engineering Construction" account should be hedged with the balance of the "Project Settlement" account

Borrow: Project settlement 50

Credit: Construction – Contract Cost 40

Engineering construction - contract gross profit 10

2. Accounting and tax treatment of the security door of the installation unit building door

(1) Tax treatment

Article 40 of the "Cai Shui [2016] No. 36, hereinafter referred to as Cai Shui [2016] No. 36) stipulates that if a sales act involves both services and goods, it is a mixed sale. Units engaged in the production, wholesale or retail of goods and individual industrial and commercial households shall pay VAT according to the sales of goods; The mixed sales of other units and individual industrial and commercial households shall be subject to VAT according to the sales services. For the purposes of this Article, the term "units and individual industrial and commercial households" engaged in the production, wholesale or retail sale of goods includes units and individual industrial and commercial households that are mainly engaged in the production, wholesale or retail of goods, and concurrently engaged in sales and services.

Analysis: From the provisions of the Announcement No. 11 of 2017 of the State Administration of Taxation, it can be seen that if the goods are sold and installation services are provided, the tax treatment should be carried out in the same way as the concurrent operation. In this case, the anti-theft door for installing the unit door is not produced by the enterprise, but is purchased, so it cannot be treated in accordance with the provisions of Document No. 11 of the State Administration of Taxation Announcement [2017], and the tax treatment should be carried out in accordance with the provisions of Document No. 36 of the Ministry of Finance and Taxation [2016], that is, it is a mixed sales behavior, and VAT should be paid according to the sales of goods.

(2) Accounting treatment

Since the installation of unit doors is a mixed sales behavior, VAT should be paid according to the sales of goods, therefore, the sales revenue should be calculated according to the contract price of 300,000 yuan for 30÷ (1÷13%) = 26.55 (10,000 yuan), and the output VAT tax is 30÷ (1÷13%)× 13% = 3.45 (10,000 yuan).

(1) When sales revenue is obtained:

Borrow: Bank deposit 30

Credit: main business income 26.55

Tax Payable – VAT Payable (Output Tax) 3.45

(2) When carrying forward the cost of sales:

Borrow: Cost of Principal Business 23

Credit: Inventory Goods 20

Employee Compensation Payable 3

If the sale of self-produced machinery and equipment is not only concurrent, but also can be simply levied at 3%, if there is no separate accounting, then the tax will be calculated from the highest. Moreover, if it is purchased, it can also be collected simply, and if it is not separately calculated, it will be treated as a deemed sale.

Installation services for self-produced machinery and equipment. General taxpayers who sell self-produced machinery and equipment and provide installation services at the same time shall separately account for the sales of machinery and equipment and installation services, and the installation services can be taxed according to the simple tax calculation method selected by Project A.

According to Article 1 of the Announcement No. 11 of the State Administration of Taxation [2017]), the provision of construction and installation services by taxpayers while selling self-produced goods such as prefabricated houses, machinery and equipment, and steel structural parts does not belong to the mixed sales stipulated in Article 40 of the Implementation Measures for the Pilot Project of Replacing Business Tax with Value-Added Tax (CS [2016] No. 36).

How do I pay VAT?

Taxpayers sell machinery and equipment and provide installation services at the same time, including the following two situations:

(1) The taxpayer provides installation services while selling self-produced machinery and equipment

In this case, there are two scenarios:

1. General taxpayers who sell self-produced machinery and equipment and provide installation services at the same time shall separately account for the sales of machinery and equipment and installation services, and the installation services can be taxed according to the simple tax calculation method selected by Project A.

After the machinery and equipment are sold to Party A, they are handed over to the machinery and equipment sales enterprise to be responsible for installation, and the machinery and equipment can be regarded as the machinery and equipment provided by the "A supply", and the installation services provided by the machinery and equipment sales enterprise can also be regarded as the installation services provided for the A project, and the simple tax calculation method can be applied to calculate the tax.

2. Where a taxpayer concurrently sells goods, services, services, intangible assets or immovable property, and different tax rates or levy rates apply, the sales amount subject to different tax rates or levy rates shall be separately calculated; If it is not separately calculated, the higher tax rate shall be applied.

(2) Taxpayers provide installation services while selling purchased machinery and equipment

In this case, there are two scenarios:

1. The taxpayer has calculated the sales amount of machinery and equipment and installation services respectively in accordance with the relevant provisions of the concurrent operation, and can also regard the machinery and equipment as the machinery and equipment provided by "A for A", and the installation service provided by the taxpayer as the installation service provided for the project of A for the first purpose, and choose to apply the simplified tax calculation method for tax calculation.

2. If the taxpayer does not separately account for the sales of machinery and equipment and installation services, then the applicable tax items and tax rates shall be determined in accordance with the relevant provisions of mixed sales.

According to the current regulations, taxpayers pay VAT on the maintenance services provided by the machinery and equipment after installation and operation in accordance with "other modern services".

Article 6 of the Announcement No. 42 of 2018 of the State Administration of Taxation:

General taxpayers who sell self-produced machinery and equipment and provide installation services at the same time shall separately account for the sales of machinery and equipment and installation services, and the installation services can be taxed according to the simple tax calculation method selected by Project A.

Announcement No. 42 and Announcement No. 11 have the same point in that they both clarify that such business is not a mixed sale, and both require enterprises to account for and calculate taxes separately.

The difference between the two announcements is:

(1) Under the model of "self-produced machinery and equipment + construction and installation services", Announcement No. 42 allows the installation services to be taxed by the simplified tax calculation method, and the levy rate of 3% is applied;

(2) Announcement No. 42 allows the sale of purchased machinery and equipment, and the installation service can also be selected as "construction and installation service", and simple tax calculation can also be selected.

If it is to provide construction services for the material supply project of A, the tax can be easily calculated. The construction services provided by the contractor can be easily taxed. Engineering services such as the foundation and main structure of housing construction provided by the general contractor require a simple tax calculation method.

A supply project refers to a construction project in which all or part of the equipment, materials and power are purchased by the project employer.

Secondly, according to Annex 2 of the Notice on Comprehensively Promoting the Pilot Program of Replacing Business Tax with VAT (CS [2016] No. 36), the Provisions on Matters Concerning the Pilot Program of Replacing Business Tax with Value-Added Tax stipulate that general taxpayers can "choose" to apply the simplified tax calculation method for construction services provided by the way of clearing contractors. The provision of construction services in the form of a contractor refers to the construction services in which the construction party does not purchase the materials required for the construction project or only purchases auxiliary materials, and collects labor costs, management fees or other fees.

First, the subject of the application of simplified taxation for the project must be the general contractor of the project;

Second, it must be a housing construction project, which is not applicable to contracted municipal, highway and other projects;

Third, the project must be the foundation and foundation, the main structure;

Fourth, it must be "construction services-engineering services", and construction services such as installation, repair, and decoration are not applicable;

Fifth, "A for" must be one or more of the four types of materials such as steel, concrete, masonry materials, prefabricated components, etc., and other materials and equipment other than those listed are not applicable.

It can be seen that the construction labor service company does not fall within the scope of "applicable" simplified tax calculation for the general contractor's subcontracting of construction labor services.

Therefore, general taxpayers can choose simple tax calculation or abandon simple tax calculation for construction services, and choose general tax calculation, and they can issue a special ticket of 9% accordingly, and there is no problem with general contracting deduction.

The Notice on the Pilot Policies of Replacing Business Tax with VAT for Construction Services (hereinafter referred to as the "Notice") clarifies the pilot policies for "replacing business tax with VAT" for construction services.

The "Notice" clarifies: "If the general contractor of the construction project provides engineering services for the foundation and foundation and main structure of the housing construction, and the construction unit purchases all or part of the steel, concrete, masonry materials and prefabricated components by itself, the simplified tax calculation method shall be applied." ”

At present, there are two ways to pay VAT in the construction industry: the general tax method is 11% and the simple tax method is 3%. For construction projects with a contract commencement date after April 30, 2016, the VAT rate for enterprises with the status of general taxpayers is 11% according to the general tax calculation method. The Provisions on Matters Concerning the Pilot Project of Replacing Business Tax with Value-Added Tax stipulates that "general taxpayers can choose to apply the simplified tax calculation method for the construction services provided by the project for A. A supply project refers to a construction project in which all or part of the equipment, materials and power are purchased by the project employer. The "Notice" deletes the original text of "optional" and amends it to "apply the simplified tax calculation method for tax calculation", that is to say, the construction services provided by general taxpayers for the project A have no other options except "applying the simplified tax calculation method for tax calculation". This means that as long as the construction unit purchases the main materials by itself, the project must be taxed according to the simple tax calculation method, and the construction enterprise provides a 3% VAT invoice. In the past, construction companies were in a relatively weak position, and this revision can be said to be beneficial to construction companies. This is also the most encouraging point of the "Notice" that makes construction enterprises happy.

(CS [2017] No. 58)

(CS [2017] No. 90)

A material supply refers to the construction project in which Party A, the employer of the project, purchases all or part of the equipment, materials and power by itself for the consideration of cost and project quality.

First, the accounting method of the materials supplied by A

There are two accounting methods for the supply of materials: the gross amount method and the net method.

The total amount method means that Party A will hand over to the construction enterprise for use after procurement, and deduct part of the project payment. When invoicing, the construction enterprise shall issue the invoice in full according to the project cost including the materials supplied by A.

For example, in May 2022, Party A and Party B agreed on a project price of RMB 10 million excluding tax (excluding tax, the same below), of which RMB 4 million was supplied by Party A, and the materials supplied by Party A were used to offset the top. Party B adopts general taxation.

1. Party A sells steel to Company B, and the accounting of both parties is handled:

(1) Employer (Party A)

Debit: Accounts payable - Company B 452 offset the project payment

Credit: Other business income 400

Tax Payable – VAT Payable (Output Tax)52

(2) Construction unit (Party B)

Borrow: Raw material 400

Tax payable – VAT payable (input tax)52

Credit: Accounts receivable 452

2. When the construction unit uses the steel for the project, Party B's accounting treatment:

Borrow: Contract Performance Cost - Contract Cost - Direct Material Cost 400

Credit: Raw materials 400

3. When settling the project payment, the accounting treatment of both parties:

(1) Kokata

Borrow: Development cost 1000

Tax payable – VAT payable (input tax) 90

Credit: Accounts Payable – Company B 1090

Debit: Accounts Payable - Company B 638

Credit: Bank Deposits 638

(2) Party B

Debit: Accounts receivable 1090

Credit: Contract assets - price settlement 1000

Tax payable – VAT payable (output tax) 90

Debit: Bank Deposit 638

Credit: Accounts receivable 638

Another accounting method for the supply of materials is the net method, under the net method, the supply of materials for A has nothing to do with the project payment, and Party A will hand it over to the construction enterprise for use after procurement, and the project payment will be paid separately. For example, Party A and Party B agree that the project cost is 6 million yuan, and A supplies materials 4 million yuan, and the project price does not include the materials supplied by A. Party B adopts general taxation.

1. Party A does not confirm the income of steel, and Party B does not do the accounting treatment of purchasing steel.

2. When the steel is used in the project, the accounting treatment of both parties:

Kokata:

Borrow: Development cost - construction and installation project cost 400

Credit: Raw materials 400

Party B does not do accounting processing

3. When settling the project payment, the accounting treatment of both parties:

(1) Kokata

Borrow: Development cost 600

Tax Payable – VAT Payable (Input Tax)54

Credit: Accounts Payable 654

(2) Party B assumes that it chooses general taxation

Debit: Accounts receivable 654

Credit: Contract Assets - Price Settlement 600

Tax payable – VAT payable (output tax)54

The material supply business of A proposes to conduct procurement and bidding for the materials supplied by A and the construction project respectively, so as to prevent the risk of underpayment of taxes caused by the duplicate expenditure of the materials supplied by A.

Case excerpt: Regarding the issue of Tianyu Company's claim that the original judgment issued invoices for unpaid construction costs.

…… In the supplementary agreement, the two parties agreed that the commercial concrete was the material for A, and the commercial concrete payment was included in the total cost of the project at the time of settlement, and the commercial concrete payment was deducted as the paid project payment during the reconciliation, and the appraisal report also included the commercial concrete payment as the project payment payable into the total project cost. Therefore, Tianyu Company's application for retrial that it did not bear the obligation to issue invoices for commercial concrete could not be established. ……

In the above example, the settlement method of material supply A belongs to the total amount method, and the settlement price of the project includes the material supplied by A.

The retrial application of Xinjiang Tianyu Construction Engineering Group Co., Ltd. was rejected.

2. Value-added tax treatment of materials supplied by A

General taxpayers can choose to apply the simplified tax calculation method for the construction services provided by the project A. (Annex 2)

If the general contractor of a construction project provides engineering services for the foundation and foundation and main structure of the building building, and the construction unit purchases all or part of the steel, concrete, masonry materials and prefabricated components on its own, the simplified tax calculation method shall be applied. （）

The construction services provided for the first project and the construction services provided in the form of clearance contractors shall be retained for future reference: construction project contract. （）

Others, mixed sales

Installation service tax rate

Installation services, generally 9%, simple levy 3% (limited to the sale of self-produced or purchased machinery and equipment and then provide installation services, or contractor construction services, or construction services for the supply of materials for A, can be simply levied. ）

1. What is the VAT rate for installation services?

The VAT rate for general taxpayers is 9%, and the simple tax collection rate is 3%; The levy rate for small-scale taxpayers is 3%.

From January 1, 2023 to December 31, 2027, small-scale VAT taxpayers will be subject to a 3% levy rate on their taxable sales income, and VAT will be levied at a reduced rate of 1%.

Construction services include engineering services, installation services, repair services, decoration services and other construction services.

Installation services refer to the assembly and placement of production equipment, power equipment, lifting equipment, transportation equipment, transmission equipment, medical experimental equipment and other equipment and facilities, including the installation of workbenches, ladders and railings connected to the installed equipment, as well as the insulation, anti-corrosion, heat preservation, painting and other engineering operations of the installed equipment.

2. How to pay VAT for the sale of self-produced goods to provide installation services?

Taxpayers shall pay VAT on the maintenance services provided by the machinery and equipment after installation and operation in accordance with "other modern services".

3. Can the installation services provided by general taxpayers be easily taxed?

General taxpayers can choose to apply the simplified tax calculation method for the construction services provided by the general taxpayer in the form of clearance contractor, the construction services provided for the project of A, and the construction services provided for the old construction project. For specific requirements, you can refer to the provisions of Cai Shui [2016] No. 36 and the Notice of the Ministry of Finance and the State Administration of Taxation on the Pilot Policy of Replacing Business Tax with VAT for Construction Services (Cai Shui [2017] No. 58).

Case: How to pay VAT for a company that sells lights and provides installation services at the same time.

Three levels.

The first level is that if the sales are steel structural parts, prefabricated houses and other construction and installation related products, then they should be taxed separately according to different tax rates.

If the sale is self-produced machinery and equipment or purchased machinery and equipment, it can be taxed separately and collected simply.

If it's not the case above, you should do a hybrid sale.

If a customer sells self-produced lamps, it may be classified as the first case, then the default tax is 9%.

If it is a purchased lamp, no, because it is not machinery and equipment, it cannot be taxed separately, nor can it be simply collected.

If there is a dispute because of the product range, then it belongs to the last case, so he should do mixed sales. The way to circumvent this is to split the company and have a separate company to do the installation service, and this separate company uses a 9% tax rate.

1. Anhui taxation

1. Anhui Provincial State Taxation Bureau's Policy and Management Questions on Replacing Business Tax with VAT (2017)

1. Construction industry

(3) Article 1 of Announcement No. 11 of 2017 of the State Administration of Taxation stipulates that "the provision of construction and installation services by taxpayers while selling self-produced goods such as prefabricated houses, machinery and equipment, and steel structural parts does not belong to the mixed sales ...... stipulated in Article 40 of the "Implementation Measures for the Pilot Implementation of the Pilot Project of Replacing Business Tax with Value-Added Tax" (Cai Shui [2016] No. 36 Document). Self-produced goods for installation services?

Answer: It should refer to all self-produced goods that provide construction and installation services at the same time.

2. On January 7, 2021, the 12366 tax service platform of the State Administration of Taxation replied to the question of "the scope of self-produced goods in Announcement No. 11 of 2017".

Question content: Announcement No. 11 of 2017 of the State Administration of Taxation

1. The provision of construction and installation services by taxpayers while selling self-produced goods such as prefabricated houses, machinery and equipment, and steel structure parts does not belong to the mixed sales stipulated in Article 40 of the "Implementation Measures for the Pilot Implementation of the Pilot Project of Replacing Business Tax with Value-Added Tax" (issued by Document No. 36 of the Ministry of Finance and Taxation [2016]), and the sales amount of goods and construction services shall be accounted for separately, and different tax rates or levy rates shall be applied respectively. Is this document applicable to all self-produced goods?

Reply content: The "self-produced goods" mentioned in Article 1 of Document No. 11 of the Announcement of the State Administration of Taxation in 2017 generally refers to all self-produced goods that provide construction and installation services at the same time.

2. Fujian taxation

On February 27, 2019, the Fujian Provincial Taxation Bureau of the State Administration of Taxation issued the "January 12366 Consultation Hot and Difficult Issues Collection"

12. What is the VAT rate for general taxpayers who produce and sell aluminum alloy doors and windows and provide installation services?

Answer: According to the "Announcement No. 11 of 2017 of the State Administration of Taxation": "1. Taxpayers who sell self-produced goods such as prefabricated houses, machinery and equipment, and steel structure parts and provide construction and installation services at the same time do not belong to the mixed sales stipulated in Article 40 of the "Implementation Measures for the Pilot Implementation of the Pilot Project of Replacing Business Tax with Value-Added Tax" (issued by Document No. 36 of the Ministry of Finance and Taxation [2016]). ”

Therefore, general taxpayers who produce and sell aluminum alloy doors and windows and provide installation services should separately account for the sales of aluminum alloy doors and windows and installation services, and apply VAT rates of 16% and 10% respectively. If it is not separately calculated, the higher tax rate shall be applied.

3. Henan taxation

On August 12, 2020, Henan Taxation, the 12366 tax service platform of the State Administration of Taxation, replied to the question of "VAT rate of aluminum alloy doors and windows".

Question content: Hello teacher! Our company is a construction company, a general taxpayer, and its business scope is mainly for construction projects, including the production and installation of doors and windows. Now our company provides aluminum alloy doors and windows production and installation services for a real estate company (doors and windows are self-made), how to issue invoices for my company? What is the tax rate?

PS: According to Article 40 of Cai Shui No. 36 of 2016, our company should issue invoices at a tax rate of 9% for mixed sales; However, some online teachers explain in accordance with Article 1 of Announcement No. 11 of 2017 of the State Administration of Taxation that our company should account for goods and installation services separately, and apply tax rates of 13% and 9% respectively. (Do aluminum alloy doors and windows fall within the scope of "self-produced goods" in this clause?) ）

Reply content: According to Article 1 of the Announcement No. 11 of the State Administration of Taxation in 2017, the sale of self-produced aluminum alloy doors and windows and the provision of installation services do not belong to the mixed sales stipulated in Article 40 of Cai Shui [2016] No. 36, and the sales of goods and construction services shall be accounted for separately, and different tax rates or levy rates shall be applied.

Therefore, your company sells self-made aluminum alloy doors and windows and provides installation services, which does not belong to mixed sales, and should be accounted for separately for the sales of goods and construction services, invoiced separately, and different tax rates or levy rates apply. The applicable tax rate for sales of doors and windows is 13% for sales of goods, and 9% for installation services.

The sale of elevators and the provision of installation services at the same time: it needs to be accounted for separately, which can be easily collected, the revenue is recognized in the tax percentage of completion method, and the single performance obligation of the accounting identification contract recognizes the revenue

When enterprises provide installation services while selling elevators, they need to confirm the specific service content provided and reach an agreement with the customer. In this process, the company needs to indicate whether the installation service fee is included in the customer list and confirm whether the installation service fee is included in the customer payment process. How to deal with the financial and tax treatment of selling elevators and providing installation services at the same time?

1. VAT treatment. Article 6 of the Announcement No. 42 of the State Administration of Taxation stipulates that if a general taxpayer sells self-produced machinery and equipment and provides installation services at the same time, the sales of machinery and equipment and installation services shall be calculated separately, and the installation services can be taxed according to the simple tax calculation method selected by Project A; If a general taxpayer sells purchased machinery and equipment and provides installation services at the same time, if the sales of machinery and equipment and installation services have been calculated separately in accordance with the relevant provisions of the concurrent operation, the installation services can be calculated according to the simple tax calculation method selected by the first project. An elevator is a kind of mechatronics equipment, which is composed of electric motors, transmission mechanisms, control devices, guide rails, cables, and other parts for vertical transportation of people or items.

Therefore, elevators belong to the category of mechanical equipment. Sales of elevators and installation services at the same time, distinguishing between self-produced or purchased:

In terms of the time when the VAT tax liability occurs, in practice, the sales of elevators generally sell goods on credit or in installments, then the VAT tax liability occurs on the day of the collection date agreed in the written contract, and if there is no written contract or the written contract does not stipulate the payment date, it is the day when the goods are sent. Of course, if the invoice is issued first, the VAT liability will be incurred on the day the invoice is issued.

2. Treatment of enterprise income tax. According to the provisions of the "National Tax Letter [2008] No. 875), if the sale of goods requires installation and inspection, the revenue shall be recognized when the buyer accepts the goods and the installation and inspection is completed. If the setup is simpler, you can recognize revenue when you ship your goods.

Note: If the duration of the enterprise installation service exceeds 12 months, the realization of revenue is recognized according to the progress of completion or the amount of work completed during the tax year. At the end of each tax period, if the result of the service transaction can be reliably estimated, the completion progress (percentage of completion) method shall be used to recognize the income from the provision of labor services. The enterprise shall determine the total amount of labor income according to the contract or agreement price received or receivable from the recipient of labor services, and recognize it as the current labor income according to the total amount of labor income provided at the end of the tax period multiplied by the completion progress after deducting the accumulated recognized labor income in previous tax years; At the same time, the estimated total cost of labor services provided is multiplied by the completion progress after deducting the accumulated recognized labor costs in the previous tax period, and the labor costs for the current period are carried forward.

3. Accounting treatment. Accounting for the sale of elevators and the provision of installation services. The new revenue standard requires enterprises to evaluate the contract at the commencement date of the contract, identify all the individual performance obligations contained in the contract, and allocate the transaction price to each individual performance obligation according to the relative proportion of the individual selling price of the goods (or services) promised by each individual performance obligation, and then recognize the corresponding revenue when each individual performance obligation is fulfilled. When identifying individual performance obligations, in addition to identifying the performance obligations themselves, it is also necessary to identify whether each individual performance obligation is performed within a certain period of time or at a certain point in time. Selling and installing elevators: The installation service of the elevator is an "easily accessible resource", the installation and sale of the elevator can be distinguished, the sale of the elevator service as a single performance obligation, and the installation service of the elevator as another single performance obligation. That is, the first fulfillment business, elevator sales, was realized at the time of delivery and customer signing. The installation service provided in the later stage is the second performance business, which does not affect the recognition of elevator sales revenue, and the installation service should be recognized in accordance with the schedule.

For example, in the elevator sales contract signed between Company A and Company B, the price of the equipment excluding tax is 800,000 yuan, and the installation fee is 120,000 yuan excluding tax. The accounting treatment of Company A is as follows:

Revenue is recognized at the time of elevator delivery and customer signing:

Debit: Accounts receivable, etc. 904000　　

Credit: main business income 800000　　

Tax payable - tax to be resold 104,000 [(80)×13%]

In the event of a VAT liability as agreed in the contract:

Debit: Tax payable - tax to be re-sold

Credit: Tax Payable - VAT Payable (Output Tax)

Installs are recognized as scheduled:

Debit: Accounts receivable, etc. 123,600　　

Credit: main business income 120,000　　

Tax Payable - Easy Tax 3600 (12×3%)

Case: The sale of purchased machinery and equipment is either separately accounted for, and 3% or 9% tax is generally levied. If it is not calculated separately, it will be sold according to the mixture

If a general taxpayer sells purchased machinery and equipment and provides installation services at the same time, can the installation service income be invoiced at 3% according to the simple collection?

Answer: It depends on whether the accounting accounts for the sales of machinery and equipment and installation services separately.

1. If the sales of machinery and equipment and installation services have been calculated separately in accordance with the relevant provisions of the concurrent operation, the installation services can be taxed according to the simple tax calculation method selected by the first project.

2. If the sales of machinery and equipment and installation services are not separately calculated, it is a mixed sale, and the 13% VAT invoice will be applied according to the main business.

Reference 1: Article 6 of the Announcement No. 42 of the State Administration of Taxation [2018]:

2. If a general taxpayer sells purchased machinery and equipment and provides installation services at the same time, if the sales of machinery and equipment and installation services have been calculated separately in accordance with the relevant provisions of the concurrent operation, the installation services can be taxed according to the simple tax calculation method selected by the first project.

Reference 2: According to Article 40 of the Implementation Measures for the Pilot Program of Replacing Business Tax with Value-Added Tax (CS [2016] No. 36) (CS [2016] No. 36), if a sales act involves both services and goods, it is a mixed sale. Units engaged in the production, wholesale or retail of goods and individual industrial and commercial households shall pay VAT according to the sales of goods; The mixed sales of other units and individual industrial and commercial households shall be subject to VAT according to the sales services.

Author: AK@CapMarket Tax; Source: AK CapMarket TAX. The content of this article is for general information purposes only and is not intended as formal auditor, accounting, tax or other advice, and we cannot guarantee that such information will remain accurate in the future. No person should act on the basis of the information contained herein without having due regard to the relevant circumstances and obtaining appropriate professional advice. The articles reproduced in this issue are for academic exchange purposes only. The original copyright of the article or material belongs to the original author or original copyright owner, and we respect copyright protection. If you have any questions, please contact us, thank you!

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