China Clarifies Status of VAT Amounts Carried Over During Asset Reorganization

Jan. 10 – China’s State Administration of Taxation released the “Announcement on the Treatment of Remaining Value-Added Tax (VAT) Amounts Carried Over During Asset Reorganization by Taxpayers (Announcement [2012] No. 55, hereinafter referred to as ‘Announcement’)” on December 13, 2012, which addresses issues concerning the treatment of remaining VAT amounts carried over during the asset reorganization process. Key information can be found below.

According to the Announcement, where a VAT general taxpayer transfers all of its assets, debts and labor force to another VAT general taxpayer (hereinafter referred to as “new taxpayer”) during the asset reorganization process, and cancels its tax registration according to the relevant procedures, the input VAT amount that has not been deducted before the deregistration may be carried forward to the new taxpayer for deduction.

The competent tax authorities of the original taxpayer are responsible for reviewing the related documents during the asset reorganization, checking the remaining VAT amount, and filling in the “Transfer Sheet for Remaining Input Tax Amounts During Asset Reorganizations by VAT General Taxpayers.” The competent tax authorities of the new taxpayer will then examine this transfer sheet along with materials submitted by taxpayers, and decide whether to allow the new taxpayer to credit the remaining VAT.

The Announcement came into effect on January 1, 2013.

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