Focus on VAT of Export Trading Companies
According to Notice 39 released by the Ministry of Finance and the State Administration of Taxation on “export goods and service VAT tax exemption” [2012] trading companies carrying out export without any domestic sales are exempted from VAT. The non-deductible-refunded Input VAT must be transferred out and adjusted to the expenses account.
According to Notice 36 released by Ministry of Finance and the State Administration of Taxation on “The Comprehensive Implementation of the Pilot Project of Replacing Business Tax with Value-added Tax” [2016] the input tax of the following items must not be deducted from the output tax: collective welfare, purchased goods for personal consumption, processing, repair, repair labour services, services, intangible assets and real estate.
When Input VAT cannot be classified and deducted for VAT exempted items, taxpayers should calculate the non-deductible input tax according to the following formula:
Non-deductible input tax =
Input tax that cannot be divided in the current period x
Sales of VAT exempt items / Current sales