Circular Number Issuance Date Effective Date Topic What is new? SAT Decree No.43 2017-12- 29 2018-02- 01 Administrative measures on registration of general VAT payers Ever since VAT was introduced into China, during a long period of time, approvals were needed before a party can be qualified as a general VAT payer. In 2015, however, as part of reform to simplify the administrative procedures in governmental affairs, approvals for general VAT payer status were cancelled. SAT Announcement  No.18 (“Announcement 18”) was promulgated to convert the “approval” system into “registration” system. Generally speaking, main ideas of Announcement 18 are kept and reflected in this Decree, but the Decree further sheds light upon below issues: 1. Situations where a taxpayer shall not be registered as a general VAT payer a) The VAT payer, including a non-corporate party, an enterprise or privately-owned business that irregularly engages in VATtaxable activities, chooses to be a small-scale VAT payer according to the applicable regulations; b) The VAT payer is a natural person (excluding privately-owned businesses). 2. Further clarification on the definition of annual taxable sales revenue for assessment of general VAT payer status a) For taxpayers that perform VAT filing on quarterly basis, “annual taxable sales revenue” refers to accumulated taxable revenue during a continuous operational period of no longer than 4 quarters; b) Taxable revenue includes revenue declared in VAT filing, revenue identified in a tax audit as well as revenue adjusted in a tax assessment; c) “Annual taxable sales revenue” refers to the revenue before the amounts of any deductible items are deducted; d) Revenue of incidental sales of intangibles or real estate shall not be included in the annual taxable sales revenue. 3. The VAT payer should go through registration procedures within 15 days after the closure of filing period of the month during which the taxpayer’s annual taxable revenue exceeds the threshold first time. The taxpayer will not be allowed to enjoy the VAT credit system until the registration procedure is completed if the taxpayer fails to register for the general VAT payer status within 5 days after receiving the notices issued by the tax authorities requiring the registration. Caishui  No.90 2017-12- 25 2017-12- 25 Several updates of VAT matters The Circular brings several updates of VAT matters. The main contents are as follows: 1.Starting from 1 January 2018, for the leased fixed assets and real estate which are used in both the VAT-able projects subject to general calculation method and the projects subject to simplified calculation method as well as VATexempted projects, employees’ welfare or personal consumption, relevant input VAT can be fully used to credit against the output VAT. 2.Starting from 1 January 2018, incomes derived from sales of tickets which are neither cancelled nor ultimately consumed by the passengers shall be subject to VAT under the category of “transportation services”. Incomes derived from passengers’ cancellation of tickets, including ticket cancellation charges, commission charges, etc., shall be subject to VAT under the category of “other modern services”. 3.Starting from 1 January 2018, airline ticket agents providing ticket booking services for offshore airways, VAT payable shall be calculated based on the total service proceeds minus any pass-through fees relevant to the offshore airway services, which are firstly obtained from the customers but ultimately paid to third party entities or individuals. 4.VAT-able revenue for the loan services, partial transfer of financial products, etc. conducted by managers of capital management products shall be determined as follows: a) Revenue of loan services shall be the interest incomes and incomes of similar kinds derived from 1 January 2018; b) Revenue derived from transfer of shares (excluding restricted shares), bonds, funds, non-commodity futures that were obtained before 31 December 2017 can be either the actual purchase price or the closing price of stocks / estimated value of bonds / net value of fund units / settlement price of the noncommodity futures disclosed on the last trading day of 2017. 5. During the period from 1 January 2018 to 31 December 2019, incomes derived from providing loan guarantee for farmers, small-scale enterprises, micro-scale enterprises, and privately-owned businesses (“original guarantees”) as well as incomes derived from providing re-guarantee for the above original guarantees can be exempted from VAT. 6. Starting from 1 January 2018, input VAT relevant to payment of road tolls can be utilized for VAT credit purpose and the creditable VAT amount shall be the amount shown on the electronic VAT invoices obtained. Alternatively, however, if electronic VAT invoices are not available, creditable input VAT can be calculated at 3% / (1 + 3%) or 5% / (1 + 5%) of the amounts of the invoices. 7. Starting from 1 May 2016, membership fees gained by social communities can be exempted from VAT. State Council Decree No. 693 2017-12- 25 2018-01- 01 Implementation Rules of the PRC Law of As a significant step of the PRC government’s effort in environment protection, on 25 December 2016, the PRC Law of Environmental Protection Tax (“EPT”) was legally approved, which officially came into effect on 1 Environmental Protection Tax January 2018. The Decree, as implementation rules, was released to provide further interpretation as well as practical guidelines to the EPT Law. Main contents of the Decree are as follows: 1. The scope of “other solid wastes” mentioned in the List of Taxable Items and Tax Rates shall be proposed by the people’s government of Province, Autonomous Region and Province-level Municipality, approved by the Standing Committee of the same level and finally reported and recorded at the Standing Committee and the State Council. 2. “Legally established urban and rural sewerage centers” mentioned in Article 5 Item 1 and Article 12 Item 1-3) of the EPT Law refers to sewerage centers dealing with sanitary waste for the social public, but not those dealing with waste water for enterprises, institutions, other operational parties established in Industrial Parks, Development Zones, etc. or sewerage centers self-built by enterprises, institutions or other operational parties. 3. Animal farms that reach certain scale stipulated by the provincial government and give out pollutants shall be subject to EPT. Institutions engaged in recycling and innocent treatment of pollutants generated by the animal farms shall not be subject to EPT. 4. Tax base for solid wastes shall be determined according to the amount discharged. The amount discharged shall be calculated based on the amount generated during the current period, minus the amount stored, disposed, and comprehensively utilized during the current period. However, if a taxpayer illegally gives out solid wastes or conducts false tax declaration, the amount discharged shall be deemed as fully equal to the amount generated without any deduction. 5. Under the following situations, the emission amount of air and water pollutants shall be deemed as fully equal to the amount generated, as means of punishment: a) The taxpayer fails to install automatic pollutant monitoring system according to the applicable regulations or fails to connect the monitoring system to the network of environment protection departments; b) The taxpayer damages, moves or changes the automatic monitoring system without permission; c) The taxpayer illegally fixes, fabricates data in the monitoring system; d) The taxpayer illegal discharges taxable pollutants via various illegal ways listed; e) The taxpayer conducts false tax declaration. 6. The Decree clarifies the calculation method of “concentration value of taxable air or water pollutants” as is mentioned in Article 13 of the EPT Law. Besides, further restrictions regarding “concentration value” are stipulated when applying for EPT tax reduction treatment. 7. The Decree clarifies the respective roles and duties of different departments involved in administration of EPT, including the tax departments, environment protection departments, as well as the people’s governments. Tax authorities and environment protection departments shall exchange necessary information via the information exchange system. The people’s governments shall play the coordinating role. Besides, the Decree also sheds light upon on the administrative measures including determination of location of taxation, solutions on dispute of tax jurisdiction, recognition of taxpayer, etc.