VAT New Regulations for Agricultural Products: Reducing 4% to Reduce Inflation Pressure?

For most agricultural products processing companies, they will enjoy a 4% VAT rate deduction. The reason is that there has been substantial progress in the "unified sales tax rate."

However, the current scope of deductions is still limited to the dairy and edible vegetable oil processing industries.

Recently, the State Administration of Taxation issued a draft of the “Announcement on the Trial Measures for the Examination and Approval of Certain Value-added Taxes on Input Taxes for Agricultural Products in Selected Industries” (hereinafter referred to as the “Announcement”). According to the announcement, it will take the lead in the liquid milk and dairy products manufacturing and edible vegetable oil processing industries to pilot the deduction method for input tax, and at the same time, the input tax deduction rate for agricultural products shall be revised from the current 13% to the applicable tax rate for the goods sold by taxpayers.

Decrease 4%?

In contrast, previously industrial output tax was levied at 17%, and input tax deduction of “input tax deduction” at 13% was a major feature of value-added tax. The calculation method for the enterprise VAT is the output tax minus the input tax deduction. The output tax refers to the tax paid when the enterprise sells the product. The input tax is the tax paid by the enterprise when purchasing the raw material. At present, output tax and input tax rates of China's agricultural product processing enterprises are not uniform. The general situation is that output tax is levied at 17%, input tax is deducted at 13%, and 4% of VAT is generated in the middle. All of these are borne by agricultural product processing enterprises.

The State Administration of Taxation does not say this. The "Announcement" stated that it would lead to misunderstanding of the so-called "high-learning and low-buckle" because China has granted preferential policies for the exemption of value-added tax on agricultural products produced by agricultural producers. At the same time, VAT general taxpayers are allowed to purchase tax exemptions. In the case of agricultural products, self-made agricultural product purchase invoices are used as deduction vouchers, and the input tax deductible is calculated based on the 13% deduction rate of the purchase price. In essence, the state has provided implicit subsidies for processing and distribution enterprises of agricultural products.

However, since the input tax of the virtual deduction is calculated based on the deduction rate of 13%, the value of the VAT rate for 17% of the goods produced and sold by most of the agricultural product processing enterprises will continue to be controversial. In sharp contrast, output tax for industrial enterprises is levied at 17%, and input tax is deducted at 13%.

According to the new adjustment opinion, the deduction rate of input tax for agricultural products shall be revised from the current 13% to the applicable tax rate for goods sold by the taxpayer, that is, if the taxpayer applies a 13% tax rate on the goods sold, the deduction rate is 13%, and the taxpayer sells If the goods are subject to a 17% tax rate, the deduction rate is 17%. Huaxin Securities believes that this adjustment will benefit 4% of the value-added tax rate for most agricultural product processing companies.

However, a large domestic dairy product company pointed out that the actual situation can not achieve a 4% VAT rate deduction. Previously, the sales tax rate for corporate products was generally divided into 13% and 17%. 13% are pure milk such as pasteurized milk and room temperature milk, which belong to primary agricultural products; 17% are milk beverages and color milk with about 40% milk content, including milk powder and yogurt. After adjustment, the company currently has about 60%-70% of the sales of products applied to 17% of the output tax, and more than 30% of the products are applicable to 13% of the output tax.

At the same time, it means that currently more than 60% of products can enjoy VAT deductions.

He also stated that the input tax is calculated on the company's main business cost, and the output tax is calculated on the untaxed price of the produced product, and the denominator is not the same, so even if the VAT rate is deducted, there is no 4 %so much.

For the oil industry, another industry in the pilot, the “burden reduction” has no real significance. An edible oil company stated that the input tax deduction rate and output tax rate of edible oil processing enterprises have always been the same, all 13%. The new regulations of the State Administration of Taxation will not increase nor reduce the tax payable by enterprises.

The same is true for the flour industry. The weight of VAT should be in the deep processing of agricultural products, and many are not in the pilot. For example, Shuanghui's ham sausage business should be deep processing of agricultural products, but it is not within the scope of this pilot.

Huaxin Securities believes that at the beginning of the year, the "Decision of the Central Committee of the Communist Party of China on Accelerating the Reform and Development of Water Conservancy" was issued. In March, the State Council Standing Committee decided to carry out national actions to increase grain production. VAT adjustments will be followed up by the state's agricultural policy support and will increase agricultural products. The processing enterprises' enthusiasm for production increases the supply of agricultural products. At the same time, this is one of the measures the government has taken to cope with inflationary pressures. As the rise in the price of agricultural products has become one of the major drivers of inflation this time, it has eased inflationary pressure from the supply side of agricultural products.

Prevention of fraudulent taxes The major cases involving the use of invoices for the purchase of agricultural products to swindle taxation are still banned. Not only in the eyes of many companies, the "Announcement" is more about preventing tax avoidance.

In addition to the adjustment of the VAT rate, the "Announcement" pointed out that the trial will determine the deduction method for input tax, change the current practice of calculating and deducting input tax for agricultural product processing and distribution companies based on purchase invoices for agricultural products, and implement a deduction for input tax on agricultural products. The specific input tax shall be taxed. The department calculates and approves.

According to the above-mentioned business sources, the input tax shall be borne by the upstream enterprises that purchase raw materials from the processing enterprises of agricultural products, and the processing enterprises shall use the purchase invoices for agricultural products for deduction. Many of these upstream enterprises are small-scale enterprises and even individuals and industrial and commercial households. They implement a fixed taxation system, so they can often write high-income invoices in accordance with the requirements of processing companies, and increase input tax credits for processing enterprises to achieve tax avoidance purposes.

The "Announcement" also stated that the current tax deduction rule triggered a large number of tax fraud cases. The methods for stealing tax mainly include: when buying agricultural products from agricultural producers, using policy loopholes to open up purchase invoices, multiplying the amount and amount, and inflating input tax to achieve the purpose of tax evasion; when purchasing agricultural products from ordinary taxpayers, To obtain special invoices for value-added tax, but to issue invoices for purchase of agricultural products on their own, even if they are deducted from the tax, but also help the seller to avoid supervision.

The tax authorities adopted various measures such as physical inventory, audits, and tax assessments. However, due to the limitations of the tax system, it has been difficult to achieve significant results. The major cases involving the use of invoices for the purchase of agricultural products to swindle taxation are still banned, and occur frequently.

According to the State Administration of Taxation, the method of deducting the input tax for agricultural products abolishes the deduction function of purchase invoices for agricultural products, and delinks the input tax amount of agricultural products from the existing deductible evidence, thus eliminating the motives for taxpayers to falsely open purchase invoices at the source; Tax authorities can use the logical relationship between taxpayers’ sales revenue and financial data such as costs and expenses to strengthen the “control” of the taxpayer’s deductibility of the input tax amount, and help prevent and detect tax frauds in a timely manner.