Interpretation of The Notice of the State Administration of Taxation on Expanding the Scope of Industries under the Policy of Full Refund of Retained VAT Tax Credit

        I. What is the main content of expanding the full refund of VAT retained tax credit policy?

        In order to further implement the decisions and arrangements of the CPC Central Committee and The State Council, the Ministry of Finance and the State Administration of Taxation jointly issued the Notice of the State Administration of Finance and Taxation on Expanding the Scope of Industries under the Policy of Full Refund of VAT Retained Tax Credits (Notice Of the State Administration of Finance and Taxation No. 21, 2022, hereinafter referred to as the Notice of 21). Expand the scope of application of the tax rebate policy for manufacturing and other industries as stipulated in the Announcement of the State Administration of Taxation of the Ministry of Finance on Further Strengthening the Implementation of the Policy of VAT Withholding Tax Rebate at the End of the Period (Announcement of the State Administration of Taxation of the Ministry of Finance No.14, 2022, hereinafter referred to as the Announcement 14). To add seven industries (hereinafter referred to as wholesale and retail industries), agriculture, Forestry, animal husbandry and fishery, accommodation and catering, residential services, repair and other services, education, health and social work and Culture, Sports and entertainment), Implement the policy of refunding incremental tax credits in full on a monthly basis and refunding the stock tax credits in a lump sum.

        II. What is the background of the announcement?

        In order to facilitate taxpayers to handle the business of Withholding tax against Tax Refund, the State Administration of Taxation has successively issued the Notice of the State Administration of Taxation on Matters Related to Handling the Refund of Withholding Tax Against VAT at the End of the Period (No. 20, 2019). Hereinafter referred to as Announcement No. 20) and Announcement of the State Administration of Taxation on Matters Related to Collection and administration of Further Strengthening the Implementation of the Policy of Withholding tax Rebate at the end of VAT period (No. 4, 2022, hereinafter referred to as Announcement No. 4), clarifying matters related to collection and administration of withholding tax rebate. After the wholesale and retail industries are included in the scope of the tax rebate rebate policy, under the current tax rebate rebate collection and administration framework, combined with the specific content of the new policy, this announcement is issued to make supplementary provisions on the related collection and administration matters.

        III. How to judge the scope of industrial retention tax rebate policy after the expansion of the retention tax rebate policy in manufacturing and other industries to wholesale and retail industries?

        After the application scope of the policy of withholding tax refund in manufacturing and other industries was extended to wholesale and retail industries, the policy of withholding tax refund in manufacturing, wholesale and retail industries was formed. According to the 21st Announcement, enterprises in manufacturing, wholesale and retail industries, Is engaged in the field of the national economy industry classification “wholesale and retail trade, farming, forestry, animal husbandry, fisheries, accommodation and catering industry”, “resident service, repair and other services”, “education”, “health and social work”, “cultural, sports and entertainment”, “manufacturing”, “science and technology service industry”, “production and electric power, heat, gas and water Taxpayers whose sales value added tax of the supply industry, software and information technology service industry, ecological protection and environmental management industry and transportation, storage and postal service industry account for more than 50% of the total sales value added tax. The proportion of the above sales shall be calculated and determined according to the sales of 12 consecutive months before the taxpayer applies for tax refund. If the operation period is less than 12 months but more than 3 months before the application for tax refund, the calculation and determination shall be based on the actual sales volume during the operation period.

        It should be noted that if a taxpayer is engaged in a number of businesses mentioned above, the total value added tax sales of related businesses shall be calculated to determine whether it belongs to the taxpayer of manufacturing, wholesale and retail industries. For example, a taxpayer obtained a total value added tax sales of 10 million yuan from July 2021 to June 2022, among which: Production and sales of machinery and equipment sales of 3 million yuan, purchase and wholesale office supplies sales of 2 million yuan, rental equipment sales of 2.5 million yuan, cultural services sales of 1.5 million yuan, construction services sales of 1 million yuan. The sales of the taxpayer from July 2021 to June 2022 in manufacturing, wholesale and retail industries accounted for 65%[= (300+200+150) ÷1000×100%]. Therefore, the current taxpayer belongs to the manufacturing, wholesale and retail industry taxpayer.

        IV. What conditions should be met for taxpayers in wholesale, retail and other industries to apply for tax rebate retention?

        Taxpayers in manufacturing, wholesale, retail and other industries who handle the retention and rebate in accordance with the provisions of no. 21 announcement shall continue to apply the retention and rebate conditions stipulated in No. 14 announcement, as follows:

        (I) A tax credit rating of A or B;

        (II) No fraudulently retained tax refund, fraudulently exported tax refund or falsely issued special VAT invoices occurred within 36 months prior to the application for tax refund;

        (III) not being punished twice or more by the tax authorities for tax evasion within 36 months prior to the application for tax refund;

        (IV) From April 1, 2019, they do not enjoy the policy of immediate withdrawal or return (withdrawal).

        V. What is the specific time for taxpayers in wholesale, retail and other industries to apply for one-time stock retention to offset tax refund?

        According to the notice on 21, eligible taxpayers in wholesale and retail industries can apply to the competent tax authorities for refund of retained tax credits starting from the July 2022 tax return period.

        It should be noted that the above time is the starting time for applying for the one-time stock retention tax rebate. Those who do not apply for it in the current period can also apply for it in the future tax return period.

        VI. What is the specific time for taxpayers in wholesale, retail and other industries to apply for incremental retention against tax refund?

        According to the announcement 21, eligible taxpayers in wholesale and retail industries can apply to the competent tax authorities for refund of incremental tax credits starting from the July 2022 tax return period.

        It should be noted that the above time is the starting time for applying for incremental retention tax refund. Those who do not apply for incremental retention tax refund in the current period can also apply for incremental retention tax refund in the subsequent tax return period.

        VII. How to determine the amount of retained tax credit applied for refund by taxpayers in manufacturing, wholesale and retail industries in accordance with the provisions of no.21 announcement?

        Taxpayers who apply for refund of retained tax credits in accordance with the provisions of Announcement No. 21 shall continue to apply for refund of retained tax credits in accordance with the provisions of Announcement No. 14, with specific differences as follows:

        (I) If the amount of tax retained at the end of the current period is greater than or equal to the amount of tax retained at the end of March 31, 2019 before the taxpayer is granted the one-time amount of tax retained at the end of the tax rebate, the amount of tax retained at the end of March 31, 2019 shall be the amount of tax retained at the end of March 31, 2019; If the amount of retained tax at the end of the current period is less than the amount of retained tax at the end of March 31, 2019, the amount of retained tax at the end of the current period shall be the amount of retained tax at the end of the current period.

        (II) After the taxpayer obtains a one-time stock retention tax rebate, the stock retention tax credit shall be zero.

        For example: a large catering enterprise retained tax credit at the end of March 31, 2019 was 15 million yuan, but did not obtain the stock retained tax rebate before. In the tax return period of July 2022, if the amount of tax retained at the end of the period is 20 million yuan, the amount of tax retained at the end of the period is 15 million yuan; If the tax deduction at the end of the current period is 10 million yuan, the taxpayer’s stock tax deduction is 10 million yuan. The taxpayer will have no more tax credit after receiving the tax rebate in July.

        VIII. How to determine the incremental retained tax credits applied for refund by taxpayers in manufacturing, wholesale and retail industries in accordance with the provisions of no.21 announcement?

        Taxpayers in manufacturing, wholesale, retail and other industries who apply for refund of incremental retained tax credits in accordance with the provisions of Announcement No. 21 shall continue to apply for refund in accordance with the provisions of Announcement No. 14, with specific differences as follows:

        (I) Before a taxpayer obtains a one-time stock tax deduction, the incremental tax deduction is the newly increased tax deduction at the end of the current period compared with March 31, 2019.

        (II) After a taxpayer obtains a one-time stock tax credit for tax refund, the incremental tax credit shall be the tax credit at the end of the current period.

        For example: For a taxpayer of a large retail enterprise, the final tax deduction on March 31, 2019 is 8 million yuan, and the final tax deduction on July 31, 2022 is 10 million yuan. If the taxpayer has not obtained the one-time stock tax deduction before applying for incremental tax rebate in the August tax return period, The taxpayer’s incremental retained tax credit is 200 (= 10-8 million) yuan; If the taxpayer has obtained a one-time stock retention tax rebate, the incremental tax retention tax deduction of the taxpayer is 10 million yuan.

        IX. How should taxpayers determine the industry attribution when applying the tax rebate policy for small and micro enterprises?

        21 announcement clearly, in accordance with the provisions of article 6 of the 14th announcement, when the application of the “Small and medium-sized Enterprise Classification Standard Provisions” (Joint enterprises of the Ministry of Industry and Information Technology (2011) no. 300) and the “Financial Industry Enterprise Classification Standard Provisions” (Silver Fa (2015) No. 309), the industry ownership of taxpayers, According to the principle of classifying industries according to major economic activities, the industry whose sales value added tax of corresponding businesses in the National Economic Industry Classification accounts for the highest proportion of total sales value added tax in the previous fiscal year shall be determined.

        For example: In July 2022, a mixed business taxpayer applied for tax rebate retention, and its VAT sales in the previous fiscal year (January 1, 2021 to December 31, 2021) amounted to 5 million yuan, among which, the sales of construction services amounted to 2 million yuan and the sales of engineering equipment leasing services amounted to 1.5 million yuan. External purchase and sales of building materials and other goods sales of 1.5 million yuan. The VAT sales of the corresponding business of the taxpayer “construction industry” accounted for 40%; “Leasing and business services” accounted for 30% of VAT sales; “Wholesale and retail” accounts for 30 per cent of VAT sales. Since the sales volume of the corresponding business of “construction industry” accounts for the highest proportion, when applying the classification standard of small and micro enterprises, it should judge whether the enterprise is a small and micro enterprise according to the construction industry classification standard stipulated in the Regulations on The Classification Standard of Small and Medium Enterprises (Joint Enterprise of the Ministry of Industry and Information Technology (2011) No. 300).

        X. Is there any change in the tax collection and management regulations for taxpayers in manufacturing, wholesale and retail industries to apply for stock tax refund and incremental tax refund?

        Taxpayers in manufacturing, wholesale and retail industries in line with the provisions of no. 21 announcement apply for stock retention tax rebate and incremental retention tax rebate, and continue to handle relevant retention tax rebate business in accordance with the provisions of No. 20 announcement and No. 4 announcement. Among them, the tax collection and administration regulations for the stock retained tax rebate handled by taxpayers are consistent with those for incremental retained tax rebate.

        XI. What tax refund application materials should be submitted by taxpayers from manufacturing, wholesale and retail industries to apply for the tax refund policy stipulated in the No. 21 announcement?

        Taxpayers in manufacturing, wholesale and retail industries are subject to the tax rebate policy stipulated in the announcement no. 21. There is no change in the tax rebate application materials submitted when applying for tax rebate, only a tax Refund (Tax Rebate) Application Form should be submitted. It should be noted that the Tax Refund (Credit) Application Form can be submitted online by the Electronic Tax Bureau or offline by the tax service hall. In accordance with the provisions of the tax rebate policy issued this time, some of the contents of the original application form for Tax Refund (Deduction) have been adjusted accordingly. When taxpayers apply for tax rebate, they can fill in the application according to their specific policies and actual production and operation conditions.

        XII. What are the changes to the Tax Refund (Credit) Application Form?

        According to the contents of the industrial retention tax rebate policy stipulated in the announcement no. 21, the “Tax Refund (Deduction) Application Form” has supplemented the columns of document basis, industry scope and so on. Specific modifications include:

        First, add “Announcement of the State Administration of Taxation of the Ministry of Finance on Expanding the Scope of The Policy of Full Refund of VAT Retained Tax Credit” (Announcement of the State Administration of Taxation of the Ministry of Finance No. 21, 2022) in the “Document Basis for Tax Refund Application”.

        Second, in the “specific industries” of the “types of tax rebate enterprises”, the options of “wholesale and retail industry”, “agriculture, forestry, animal husbandry, fishing”, “accommodation and catering industry”, “residential services, repair and other services”, “education”, “health and social work”, “culture, sports and entertainment industry” are added.

        Third, the expression of value-added tax sales of 7 industries such as wholesale and retail industry will be added in the calculation formula of the proportion of value-added tax sales of corresponding “specific industry” in the “application type of tax rebate”.

Article source：General Office of the State Administration of Taxation