China Specifies VAT Treatment for Sale of Self-used Fixed Assets

When selling self-used fixed assets, certain general value-added tax (VAT) payers under specific circumstances can use the simplified method to calculate their VAT payment, says the State Administration of Taxation (SAT) on January 6.

According to the “Announcement on VAT Issues Concerning the Sale of Self-used Fixed Assets by VAT General Taxpayers (SAT Announcement [2012] No.1),” for a VAT general taxpayer which sells its self-used fixed assets and falls under two specific circumstances (listed below), VAT may be charged at the tax rate of 4 percent and then reduced by half using the simplified calculation method (which does not allow input VAT to be deducted from output VAT). The VAT general taxpayer shall not issue a VAT Special Invoice when this specific VAT charge takes place.

The two circumstances are as follows:

1. The taxpayer was a small-scale taxpayer when purchasing or homemaking the fixed assets and sells such fixed assets after being recognized as a general taxpayer
2. The VAT general taxpayer conducts taxable activities on which the VAT shall be levied through the simplified method, and sells fixed assets whose input VAT shall not be deducted and is not deducted

The Announcement will take effect on February 1, 2012. Unsettled tax issues that take place prior to that date shall be treated according to the Announcement.

---