The State Administration of Taxation, the Ministry of Finance and the General Administration of Customs of China recently released the "Notice on Expanding the Piloting of General Taxpayers in Value Added Tax Enterprises in Areas Specialized by the Customs," which will come into force on February 1, 2018. What is the background of this policy and what are the main contents? The responsible officials of the State Administration of Taxation have interpreted this.

In order to implement the "Decision of the State Council on Promoting the Steady Improvement of Foreign Trade", the State Administration of Taxation, the Ministry of Finance and the General Administration of Customs announced on November 1, 2016 in Kunshan Integrated Free Trade Zone and Suzhou Industrial Park Comprehensive Free Trade Zone, Shanghai Songjiang Export Processing Zone, Zhengzhou Export Processing Zone in Henan Province, Zhengzhou Xinzheng Comprehensive Free Trade Zone, Chongqing Xiyong Comprehensive Free Trade Zone and Shenzhen Yantian Comprehensive Free Trade Zone in 7 special customs supervision zones.

In the past year or more, the pilot work has adhered to market orientation, respected the dominant position of enterprises, broke the policy of restraining the development of special regulatory regions in customs and effectively promoted the ability of enterprises in the region to improve the co-ordination of the two markets and make use of the two resources, Trade "big into big out" as 'superior to excellent out', and enhance the vitality and competitiveness of enterprises in special customs supervision zones. "Officials in charge of the State Administration of Taxation said that to further promote the quality and efficiency of the development of customs special supervision and control areas , To promote the transformation and upgrading of processing trade and trade facilitation, the SAT, the Ministry of Finance and the General Administration of Customs decided to expand the pilot qualification of general taxpayers.

The main contents of the "Notice" are twofold: First, to expand the pilot area. Including Zhejiang Ningbo Export Processing Zone, Chengdu High-tech Comprehensive Bonded Zone, Alashankou Comprehensive Bonded Zone, Guangxi Beihai Export Processing Zone, Beijing Tianzhu Comprehensive Bonded Zone, Shanghai Minhang Export Processing Zone, Chenzhou Comprehensive Bonded Zone, Liaoning Dalian Export Processing Zone, Fuzhou Bonded Port Area, Fuzhou Export Processing Zone, Qingdao Qianwan Bonded Port Area, Wuhan Donghu Comprehensive Bonded Area, Wuxi High-tech Zone Comprehensive Bonded Zone, Suzhou High-tech Comprehensive Free Trade Zone, Zhenjiang Comprehensive Bonded Zone, Huaian Comprehensive Free Trade Zone, Wujiang Comprehensive Free Trade Zone 17 Customs special supervision area.

Second, the content of the exit mechanism. Enterprises applying for general taxpayer qualification for pilot projects for 36 months may apply to withdraw from the pilot program. After withdrawing from the pilot program, the tax policies for non-pilot enterprises within the special supervision area of the customs will be resumed and the trial can not be applied within 36 months. Enterprises that wish to withdraw from the pilot enterprises should submit their pilot application to the competent tax authorities and the competent Customs in advance, and exit the pilot projects after approval by the competent tax authorities and competent customs authorities. Before exiting a pilot enterprise, the tax amount should be settled before the exit formalities can be handled. Enterprises in the zone before the exit of the pilot value-added tax credit will not be deductible or refund, transfer costs. Enterprises that withdraw from the pilot projects shall not receive and issue VAT invoices except for sales and service, intangible assets or real estate.

"Taking into account the enterprises to participate in the pilot, according to changes in market conditions, the business model will be adjusted accordingly, in order to better support enterprises to adapt to changes in the development of foreign trade situation, so the pilot to expand the pilot set up a pilot exit mechanism." Tax Administration Relevant person in charge said that the scope of application of the exit mechanism includes the pilot into the pilot of the 17 special supervision of the customs area and pilot pre-trial of the 7 special customs supervision area.