There are two China VAT treatment scenarios when the used fixed assets are sold.
- When the taxpayer sells used fixed assets which were acquired or produced before the date of December 31 2008, the taxpayer can use a simplified method for calculating the China VAT payable at a rate of 3%. The formula is the Total Used Fixed Assets Sales Value / (1+3%) *2%.
- When the tax payer sells used fixed assets which were acquired or produced after the date of January 1 2009, it shall calculate the China VAT payable with the applicable value-added tax rate. The formula is Total Used Fixed Assets Sales Value / (1+17%) * 17%.
If the China VAT input of the fixed assets can be utilized to offset China VAT output, but due to the tax payer’s reason, the VAT input were not utilized to offset VAT output, then 17% VAT rate still apply when these used fixed assets are sold. But if the tax payer sells used fixed asset under any of below situations, simplified method can be applied.
2.1 China Tax payer sells used fixed assets of which input VAT has not be utilized to offset the output VAT:
i) Goods purchased or taxable services used for non-taxable items, goods purchased or services exempt from VAT, goods purchased or taxable services for collective welfare or individual consumption;
ii) Abnormal losses of goods purchased or relevant taxable services;
iii) Goods purchased or taxable services consumed in the production of work-in-progress or finished goods which suffer abnormal losses.
2.2 Fixed assets were acquired when the tax payer was small-scale but sold when the tax payer has been identified as general tax payer;
2.3 If the general taxpayer acquired fixed assets under the policy of simplified value-added tax method and sells above used fixed assets of which input VAT has not be utilized to offset the output VAT.
Used fixed assets refer to the fixed assets recognized and recorded in accounting ledger according to relevant accounting standards and have been depreciated.
Under the policy of simplified VAT method, common China VAT invoice rather than special China VAT invoice should be issued.
If you have any questions, please feel free to contact our professionals in Lee & Lee Associates via email: info@lla.cc, or, phone call: +86 10 6593 5066.
