Hot FAQs on Epidemic Prevention Tax Incentives (Phase 12)

1. For small-scale taxpayers, the tax rate was reduced from 3% to 1% for the period of March to May. However, due to accounting errors, some ordinary invoices issued in March had a 1% rate and some had a 3% rate. For the 3% invoices that cannot be recovered because the purchaser cannot be contacted, should the VAT for the first quarter of April be calculated and paid at 1% for those wrongly issued 3% invoices? Is it necessary to recover the original invoices and issue red‑ink invoices?

Answer: According to the Announcement of the Ministry of Finance and the State Administration of Taxation on VAT Policy Supporting the Resumption of Work and Production by Individual Businesses (2020 No. 13), from March 1 to May 31, 2020, for VAT small‑scale taxpayers in all provinces, autonomous regions, and municipalities directly under the central government except Hubei Province, the taxable sales income subject to the 3% collection rate is levied at a reduced rate of 1%.

During the implementation period of the above resumption policy, for VAT small‑scale taxpayers in provinces other than Hubei whose monthly sales exceed RMB 100,000 and who have issued ordinary VAT invoices with a 3% collection rate, they may directly declare and pay VAT at the reduced 1% rate when filing tax returns. It should be noted that in accordance with the Measures of the People's Republic of China for the Administration of Invoices and other relevant regulations, taxpayers shall issue invoices truthfully. When a taxpayer enjoys the policy of levying at a reduced rate of 1%, when issuing ordinary VAT invoices, the tax rate or collection rate column should be filled with "1%". In the future, taxpayers shall issue ordinary VAT invoices in accordance with the above provisions.

2. Our company operates an advertising business. Can we enjoy the VAT exemption policy for life services during the epidemic?

Answer: According to the Announcement of the Ministry of Finance and the State Administration of Taxation on Tax Policies Supporting the Prevention and Control of the Novel Coronavirus Pneumonia Epidemic (2020 No. 8), the income obtained by taxpayers from providing life services is exempt from VAT. The specific scope of life services shall be implemented in accordance with the Annotations on Sales of Services, Intangible Assets, and Real Estate (issued by Cai Shui [2016] No. 36).

The Annotations on Sales of Services, Intangible Assets, and Real Estate (issued by Cai Shui [2016] No. 36) stipulate that advertising services are modern services. Therefore, the advertising services provided by your company are not eligible for the VAT exemption policy for life services.

3. Our company is a passenger transport enterprise and enjoys the VAT exemption for providing public transportation services during the epidemic. Can our customers deduct the tax from the tax‑exempt electronic ordinary VAT invoices we issue?

Answer: Article 6 of the Announcement of the Ministry of Finance, the State Administration of Taxation, and the General Administration of Customs on Policies Related to Deepening VAT Reform (2019 No. 39) stipulates that if a taxpayer purchases domestic passenger transport services and has not obtained a special VAT invoice, it may temporarily deduct the tax amount indicated on the electronic ordinary VAT invoice obtained from the output VAT.

According to the current VAT policy, if your company enjoys the VAT exemption policy and issues electronic ordinary VAT invoices to customers, the tax rate or collection rate column should be filled with "Exempt", and the invoice will not show the tax amount, so the next link cannot deduct input tax based on this.

4. Our company is a small‑scale taxpayer. In the quarterly declaration, we are eligible for both the VAT exemption for small‑scale enterprises and the VAT exemption for life services. When filing the quarterly return, should we fill in the form according to the small‑scale enterprise exemption or the life service VAT exemption?

Answer: If both the small‑scale enterprise VAT exemption policy and other VAT exemption policies are met, the declaration form should be filled in according to the small‑scale enterprise exemption policy.

5. A small‑scale taxpayer in Hubei qualifies for the tax exemption policy supporting the resumption of work and production of individual businesses. In April 2020, some business transactions issued special VAT invoices, and some issued ordinary VAT invoices. Can the part with ordinary invoices enjoy the tax exemption?

Answer: If a VAT small‑scale taxpayer, based on actual business needs, issues a special VAT invoice at the 3% collection rate for a particular transaction, the taxpayer must declare and pay VAT at the 3% rate for that transaction. For other taxable sales income subject to the 3% rate for which no special invoice was issued, the VAT reduction or exemption policy for small‑scale taxpayers resuming work and production may still apply.

6. Due to the epidemic, the continuing education (adult college entrance examination) that was originally scheduled to graduate in April this year can only graduate in July. Can we still enjoy the special additional deduction for continuing education expenses from May to July?

Answer: The deduction termination date is determined according to the academic education cutoff date uniformly set by the school.

7. The film industry has been greatly affected by the epidemic this year. Is there any provision for extending the carry‑forward period for losses incurred by enterprises?

Answer: According to the Announcement of the Ministry of Finance and the State Administration of Taxation on Tax and Fee Support Policies for Industries such as Film (2020 No. 25), for losses incurred by film industry enterprises in 2020, the maximum carry‑forward period is extended from 5 years to 8 years. Film industry enterprises are limited to film production, distribution, and exhibition enterprises, excluding enterprises that distribute films through information networks such as the Internet, telecommunications networks, and radio and television networks. If your unit meets the conditions stipulated in the document, the maximum carry‑forward period for losses incurred in 2020 is extended from 5 years to 8 years.

8. An enterprise was registered as a general taxpayer at establishment. In May 2019, it re‑registered as a small‑scale taxpayer according to Announcement No. 4 of the State Administration of Taxation in 2019. Later, due to business expansion, sales reached the general taxpayer threshold, and it was re‑registered as a general taxpayer in 2019. Then, before December 31, 2020, if it meets the condition of cumulative sales of less than RMB 5 million for 12 consecutive months or four consecutive quarters, can it be re‑converted to a small‑scale taxpayer again?

Answer: Yes. According to Article 6 of the Announcement of the State Administration of Taxation on Certain VAT Collection and Administration Issues such as the Dealership of Second‑hand Cars (Announcement No. 9 of the State Administration of Taxation in 2020), a general taxpayer that meets the following conditions may choose to re‑register as a small‑scale taxpayer before December 31, 2020: the cumulative sales for the 12 consecutive months (or 4 consecutive quarters) immediately preceding the date of re‑registration do not exceed RMB 5 million.

Therefore, if a taxpayer had previously chosen to convert from a general taxpayer to a small‑scale taxpayer in 2019 or earlier, and later re‑registered as a general taxpayer, it is allowed to convert again from a general taxpayer to a small‑scale taxpayer in 2020.

9. Our enterprise reimburses employees in Hubei for nucleic acid testing expenses incurred there. The employees obtain outpatient fee receipts with their personal names and with the supervision seal of the Ministry of Finance. Can these be used as pre‑tax deduction vouchers for the enterprise?

Answer: They can be used as pre‑tax deduction vouchers for corporate income tax.

10. Our company rented out properties during the epidemic and reduced the rent for lessees. According to regulations, we calculate property tax based on the reduced rent. Do we need to pay corporate income tax on the reduced property tax?

Answer: The property tax paid by an enterprise for leasing properties can be deducted before tax. After the rent reduction, the property tax paid is less, and the deduction is based on the actual amount paid.

11. Are there any preferential policies for the national film development special fund during the epidemic?

Answer: According to Article 1 of the Announcement of the Ministry of Finance and the National Film Administration on the Policy of Temporarily Exempting the National Film Development Special Fund (Announcement No. 26 of the Ministry of Finance and the National Film Administration in 2020): Hubei Province is exempted from the national film development special fund from January 1, 2020 to December 31, 2020; other provinces, autonomous regions, and municipalities are exempted from the national film development special fund from January 1, 2020 to August 31, 2020.

Article 2 stipulates that if the taxpayer meets the exemption conditions specified in this announcement but has already paid the fund before the issuance of this announcement, the amount paid may be used to offset the fund payable in subsequent months or be refunded.

12. Our company is a KTV and suffered a lot during the epidemic. Are there any preferential policies for the culture business construction fee?

Answer: According to the Announcement of the Ministry of Finance and the State Administration of Taxation on Tax and Fee Support Policies for Industries such as Film (Announcement No. 25 of the Ministry of Finance and the State Administration of Taxation in 2020), the culture business construction fee is exempted from January 1, 2020 to December 31, 2020.

Therefore, your company may enjoy the exemption policy for culture business construction fee in accordance with the regulations. If the fee has already been levied before the issuance of this announcement, it may be offset against the culture business construction fee payable in subsequent months or refunded.

13. We are not a film industry enterprise, but we are also seriously affected by the epidemic. I noticed that in the recent announcement on tax and fee support policies for industries such as film, the culture business construction fee is exempted this year. Is there any industry restriction?

Answer: According to the Announcement of the Ministry of Finance and the State Administration of Taxation on Tax and Fee Support Policies for Industries such as Film (Announcement No. 25 of the Ministry of Finance and the State Administration of Taxation in 2020), the culture business construction fee is exempted from January 1, 2020 to December 31, 2020. Any payer of the culture business construction fee may enjoy the exemption during this period.

14. I am an advertising company. I saw that the document says the culture business construction fee is exempted from January 1, 2020 to December 31, 2020. Does this preferential period refer to the period to which the fee belongs or the declaration period?

Answer: The preferential period refers to the period to which the fee belongs.

15. Severely affected by the epidemic, our company wants to enjoy the preferential treatment for the culture business construction fee. Should we just fill in all zeros for zero declaration, or should we fill in the report items normally and select the exemption nature code for tax‑exempt declaration?

Answer: If your company enjoys the culture business construction fee exemption according to the Announcement of the Ministry of Finance and the State Administration of Taxation on Tax and Fee Support Policies for Industries such as Film (Announcement No. 25 of the Ministry of Finance and the State Administration of Taxation in 2020), you need to fill in the relevant items of the declaration form truthfully, select the document, and the exemption for the culture business construction fee for the period from January 1, 2020 to December 31, 2020 will be automatically completed.

16. The epidemic has severely affected our company. We saw that the State Administration of Taxation issued a document that there is an exemption for culture business construction fee this year, but we have already declared and paid for the previous months. How should we apply for a refund?

Answer: Apply to the competent tax authority for a refund of the culture business construction fee for the period from January 1, 2020 to December 31, 2020.

17. The epidemic has severely affected our company. We saw that the State Administration of Taxation issued a document that there is an exemption for culture business construction fee this year, but we have already declared and paid for the previous months. We do not want to apply for a refund. If we apply for offsetting against future fees, how should we fill in the declaration form? Should we offset it in 2021?

Answer: If the culture business construction fee for the period from January 1, 2020 to December 31, 2020 has been paid, you may apply to the competent tax authority to offset the culture business construction fee payable in the future.

18. Our company has been severely affected by the epidemic. According to the document, we can enjoy the exemption of culture business construction fee this year. During the exemption period, how should we handle the allowable deduction for advertising release fees? Should we fill it in in 2021, or fill in the deduction items normally?

Answer: The advertising release fees should be filled in normally in the deduction items, and the calculated amount payable is exempted.

19. Can maternity insurance enjoy the half‑reduction policy according to Yi Bao Fa [2020] No. 6?

Answer: The Opinions on Comprehensively Promoting the Merger of Maternity Insurance and Basic Medical Insurance for Employees (Guo Ban Fa [2019] No. 10) clarifies that after the merger of maternity insurance and basic medical insurance for employees, the two insurance types remain, benefits are guaranteed, and the funds of the two insurances are merged and managed together, no longer listed separately. Yi Bao Fa [2020] No. 6 clearly stipulates that the employer's contribution to basic medical insurance for employees may be halved, but does not provide for maternity insurance.