There are six major changes, and the value-added tax law involving over 6 trillion yuan in revenue will be reviewed again

At the 5th meeting of the 14th Standing Committee of the National People's Congress to be held on the 28th, the draft value-added tax law will be reviewed. The second round of value-added tax, the largest tax category involving 6 trillion yuan in revenue, is approaching and has attracted much attention.

At present, the legislation of value-added tax generally follows the idea of shifting the tax system, maintaining the current tax framework and tax burden level basically unchanged. However, there are still some changes in the content, which are related to the vital interests of the people and enterprises. So, what are the changes in the second review draft of the Value Added Tax Law?

According to Yang Heqing, spokesperson for the Legal Work Committee of the Standing Committee of the National People's Congress, there are six major changes in the second review of the value-added tax law:

·Upgrade current relevant policy provisions into laws, enrich and improve the small-scale taxpayer system

·Refine and clarify the specific situation of simple tax calculation

·Further clarify the scope and requirements for authorizing the State Council to formulate special preferential policies

·Clearly stipulate that taxpayers have the right to independently choose the processing method for retaining tax credits

·The value-added tax amount shall be separately listed on the transaction voucher in accordance with the regulations of the State Council

·In accordance with the provisions of the Legislative Law and the requirements of tax statutory principles, further standardize the relevant tax legislative authorization clauses

Several financial and tax experts told First Financial that the second review has further improved the value-added tax legislation. If the opinions during the review are relatively unified, the value-added tax law is expected to be passed in the second review, which is of great significance for improving the value-added tax system and implementing the legal principles of taxation.

Value added tax is the largest tax category in China, with a revenue of over 6 trillion yuan, accounting for nearly 40% of tax revenue. It has also been the main force in tax reduction, fee reduction, and tax refund in recent years, and its every move has attracted attention from the outside world. At present, value-added tax is implemented in the form of temporary regulations of the State Council. In order to implement the principle of tax legality and establish a modern value-added tax system, value-added tax has risen to a mature legal condition after the large-scale promotion of value-added tax reform in recent years.

At the end of 2019, the value-added tax law was publicly solicited for opinions from the society. At the end of 2022, the value-added tax law was first submitted to the National People's Congress for review, and this time it will be reviewed for the second time.

Wang Huayu, Deputy Director of the Finance and Taxation Law Research Center at Shanghai Jiao Tong University, told First Financial that there are many highlights in the second round of review. For example, incorporating effective and long-term policies into the law reflects the long-term support of tax policies for small and micro enterprises. For example, enriching and improving the small-scale taxpayer system.

There are over 50 million small-scale value-added tax taxpayers in China, mainly small and medium-sized enterprises. Under the impact of the epidemic, small and micro enterprises are facing difficulties in operating, and the provisions related to small-scale taxpayers in value-added tax legislation have attracted much attention.

For example, according to the draft value-added tax law publicly soliciting opinions at the end of 2022, the standards for small-scale value-added tax taxpayers and the application of simplified tax calculation methods are stipulated by the State Council. The value-added tax collection rate applicable to the simplified tax calculation method is 3%.

In order to further support the development of small and micro enterprises and individual businesses, the Ministry of Finance and the State Administration of Taxation recently issued a document exempting small-scale value-added tax taxpayers with monthly sales below 100000 yuan from value-added tax preferential policies, and reducing the tax collection rate of small-scale value-added tax taxpayers from 3% to 1% preferential policies, both of which will continue until the end of 2027.

"The second review draft of value-added tax is expected to have some policy statements in improving the small-scale taxpayer system, but it will not be too specific because this policy adjustment is often frequent," said Wang Huayu.

Wang Huayu stated that based on the opinions solicited from various parties, a major highlight of the second review draft of the value-added tax law is to further optimize and improve the tax system rules, and enrich the technical details in the legislative process. For example, refining and clarifying the specific situation of simple tax calculation, specifying that taxpayers have the right to independently choose the processing method of retained tax amount, and stipulating that the value-added tax amount should be separately listed on the transaction voucher in accordance with the regulations of the State Council.

Xiong Wei, Dean of the School of Law at Shenzhen University, told First Financial that based on publicly available information, the right to retain and refund value-added tax has been recognized as a taxpayer's right. Taxpayers can choose to retain or refund taxes, rather than leaving the decision to the tax authorities. For example, if the value-added tax amount is listed on the transaction voucher, it means that the value-added tax completely exhibits the characteristics of being an extra price tax.

Value added tax taxpayers are very concerned about the policy of retaining and refunding value-added tax, which has been included in the draft of the value-added tax law.

According to the draft value-added tax law publicly solicited for comments at the end of 2022, the portion of the current input tax amount that exceeds the current output tax amount can be carried forward to the next period for further deduction or refunded. The specific measures shall be formulated by the finance and tax authorities of the State Council. Taxpayers shall deduct input tax from output tax by presenting value-added tax deduction vouchers prescribed by laws, administrative regulations, or the competent tax authority of the State Council.

Yang Heqing stated that the draft of the Value Added Tax Law has absorbed the achievements of the reform of retained tax refunds in recent years, and further improved the system of retained tax refunds based on the relevant provisions of the Provisional Regulations on Value Added Tax. One is to clarify the two ways to handle the retained tax amount, including carrying it forward to the next period for continued deduction and refunding the taxpayer. Secondly, it is explicitly stipulated that taxpayers have the right to independently choose the processing method for retaining the tax amount, which can be carried forward to the next period for further deduction or applied for a refund. Thirdly, authorize the State Council to formulate relevant specific measures.

Last year, in order to alleviate the financial pressure on enterprises, China launched a new policy of retaining and refunding value-added tax of over 2.4 trillion yuan, which refunded existing retained tax amounts and fully refunded incremental retained tax refunds on a monthly basis to some industries, with unprecedented efforts to help some enterprises overcome difficulties. This year, China continues to implement the value-added tax retention and refund policy.

At present, some of the draft value-added tax laws authorize the State Council to implement relevant policies. For example, the draft value-added tax law states that according to the needs of national economic and social development, the State Council can formulate special preferential policies for value-added tax and report them to the Standing Committee of the National People's Congress for record. Previously, a major opinion from the outside world regarding the revised draft was to standardize legislative authorization and further clarify relevant provisions.

In response to this opinion, the second review of the draft value-added tax law will further clarify the scope and requirements for authorizing the State Council to formulate special preferential policies. Further standardize the relevant tax legislative authorization clauses.

Xiong Wei believes that if we can strengthen the application of tax statutory principles, regulate the constraints of tax authorization rules, and further clarify the scope and methods of special tax incentives, as stated in public information, it can be said to be a commendable progress.

According to the currently publicly available draft of the Value Added Tax Law, it consists of 6 chapters and 36 articles, clarifying the scope of value-added tax collection, taxpayer definition, tax rate, taxable amount, tax incentives, and collection management. Although some content has been adjusted, the legislation follows the idea of shifting the tax system, keeping the overall framework of the current tax system unchanged and the overall level of tax burden unchanged.

Shi Wenwen, Director of the Finance and Tax Law Research Center at China University of Political Science and Law, once told First Financial that this legislation maintains the current tax system framework and there has been no overall change in preferential policies. The statutory value-added tax exemption items will continue to be retained, and the preferential regulatory documents of the financial and tax departments have also made transitional arrangements.

According to data from the Ministry of Finance, the domestic value-added tax in the first seven months of this year was 4357.8 billion yuan, a year-on-year increase of 84.2%. This is mainly due to the high amount of retained tax refunds in the same period last year, with a relatively low base. In the first 7 months, domestic value-added tax accounted for approximately 37% of the total tax revenue. Value added tax is a shared tax between the central and local governments, and revenue is shared by the central and local governments through the "Five Five Year Plan".