Producers in China Now Require Goods Production Certificate

According to a new announcement by the State Administration of Taxation (SAT) any taxpayer that sells its own products and provides construction services needs to provide a goods production certificate in order to avoid double taxation by the state and local tax authorities.

The SAT issued Announcement [2011] No. 23 on March 25 to stipulate that, for a tax payer that sells its own products and provides construction services at the same time in mixed sales, tax authorities shall calculate its value-added tax (VAT) liabilities based on goods sales, and business tax (BT) liabilities based on construction labor turnover, separately.

In China, the state tax bureau levies VAT on goods sold and the local tax bureau collects BT on services provided. To reduce the risk of having part or all of its revenue from the aforementioned mixed sales subject to VAT and BT at the same time, a taxpayer shall submit a goods production certificate – issued by the state tax bureau in charge of the region where the taxpayer has registered itself – to the local tax bureau in charge of the region where the taxpayer provides its services.

The Announcement will take effect starting May 1, 2011.

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