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In accordance with the relevant provisions in the newly promulgated and enforced "Law of the People's Republic of China on the Administration of Tax Collection" and the detailed rules of the implementation thereof, we hereby clarify the relevant issues as follows on crediting against unpaid tax with refundable tax: I. The refundable tax amount which is creditable includes the following taxes which were collected after May 1, 2001 and have been confirmed to be refundable: (1) reduced or exempted (including "tax collected in advance and refunded afterwards") refundable tax; (2) the settled refundable tax formed from the tax amount prepaid in accordance with the law; (3) mis-colleted refundable tax, fines on the tax in arrears, fines and confiscated illegal income (hereinafter referred to as fines and confiscated money, same in the below); (4) other refundable taxes, fine on the tax in arrears, fines and confiscated money; (5) the refundable interest of mis-collected and other refundable taxes. II. The creditable unpaid taxes include the following unpaid taxes occurred after May 1, 2001: (1) unpaid tax; (2) payable but unpaid fine on the unpaid tax in arrears; (3) fines and confiscated money based on the payable but unpaid taxes for which the taxation organ has made a decision on administrative penalty, but the taxpayer neither applies for administrative reconsideration or brings the administrative litigation, nor performs his tax payment obligation; payable but unpaid fines and confiscated money with which the refundable tax is requested by the taxpayer to be credited against. III. The taxes, fines on taxes in arrears, fines and confiscated money separately levied by state taxation bureaus and local taxation bureaus shall not be credited against each other; such non-tax income to be levied and refunded by the taxation organs as agricultural tax, affixes to education fees, social insurance premiums, cultural undertaking construction expenses, etc. shall not be used to credit against the tax income, and vice versa. When an unpaid tax is credited against, it shall be credited against sum by sum according to the time sequence of the sums of the unpaid tax, that is, those which occurred first shall be credited against first. IV. On the Use of the Credit-against Documents and the Determination of the Credited Amount (1) When a taxpayer has both refundable tax and unpaid tax to be credited against, the taxation organ at the county level or above shall fill in the "Notice on Crediting against Unpaid Tax with Refundable Tax" (see Annex 1 for the pattern) and notify the taxpayer, and issue the tax payment receipts pursuant to the amount actually credited against. (2) At the time of determination of the amount actually credited against, the date when the "Notice on Crediting against Unpaid Tax with Refundable Tax" is filled in shall be regarded as the deadline for calculating the interest payable over the refundable tax amount, or the deadline for calculating the amount of the fine on the payable but unpaid tax and the total amount of the unpaid tax. If the total refundable amount is more than the unpaid amount, the amount shall be actually credited against by the unpaid amount; while if the total refundable amount is less than the unpaid amount, the amount shall be actually credited against by the total refundable amount. V. On the Tax Accounting Treatment of the Crediting Business (1) When the refundable tax and unpaid tax which are credited against fall in the same paragraph or item of budget account, the tax accounting of the crediting business shall be treated according to the "Notice on Crediting against Unpaid Tax with Refundable Tax". Since the accounting of the present payable but unpaid fine on the tax in arrears is conducted off the book, the fine on the tax in arrears which is actually credited against shall be charged off in the account of "tax for collection", and be credited in the account of "collectable tax"; then the taxes actually credited against, the fine on the tax in arrears, the fines and confiscated money shall be charged off in the account of "overpaid tax", "drawn or refunded tax" or "reduced or exempted tax", and be credited in the account of "tax for collection". (2) When the refundable tax and unpaid tax which are credited against fall in different paragraphs or items of budget account, they shall be regarded as refunded tax for administration, and be handled in the following ways: 1. When the said taxes are actually credited against, the accounting department of the taxation organ at the county level or above shall,, according to the "Notice on Crediting against Unpaid Tax with Refundable Tax", fill in the "Notice on Stock Transfer" in one pattern, three sheets (the specific pattern shall be made by the relevant departments in all places with reference to the Notice on correction of account and through consultation with the local state treasury). The first sheet shall be preserved by the taxation organ for check, the second and the third sheet shall both be submitted to the state treasury for verification. The second sheet shall be used by the state treasury as a stock transfer document, and the third sheet shall be affixed a seal by the state treasury, then returned to the taxation organ along with the daily income statement, which shall be used as the accounting document for the taxation organ to transfer the account of the tax amount of stock debit. 2. The accounting of the crediting business shall be treated according to the "Notice on Crediting against Unpaid Tax with Refundable Tax" and the "Notice on Stock Transfer" (see Annex 2 for practical examples): (a) the fine on the tax in arrears which is actually credited against shall be charged off in the account of "tax for collection", and be credited in the account of "collectable tax": (b) the stock debit account and level corresponding to the unpaid tax, the payable but unpaid fine on the tax in arrears, the payable but unpaid fines and the confiscated money which are actually credited against shall be charged off in the "stock debit" account, and meanwhile the stock return account and level corresponding to the refundable tax, the refundable fine on the tax in arrears, the refundable fines and the confiscated money which are actually credited against shall be credited in the "stock debit" account; (c) the taxes, the fines on the taxes in arrears, the fines and the confiscated money which are actually credited against shall be charged off in the account of "overpaid tax", "drawn or refunded tax" or "reduced or exempted tax", and be credited in the account of "tax for collection". Annexes: 1. "Notice on Crediting against Unpaid Tax with Refundable Tax" 2. Practical Examples Annex 1: NOTICE ON CREDITING AGAINST UNPAID TAX WITH REFUNDABLE TAX No. ___ of ________(Taxation Administration) Concerning ______ ___________________: Up to ___ (month) ____ (date), ___ (year), the total amount of the unpaid tax of your Entity was _________ Yuan, and the total amount of the refundable tax was _________ Yuan. In accordance with Article 79 of "Detailed Rules for the Implementation of the Law of the People's Republic of China on the Administration of Tax Collection", the refundable tax of your Entity is hereby used to credit against __________ Yuan of unpaid tax (Annex: Schedule on Crediting against Unpaid Tax with Refundable Tax). It is hereby notified. ______ Taxation Bureau _____ (Date)___ (Month) _____ (Year) Annex 2: PRACTICAL EXAMPLES Example 1: A taxpayer mis-paid 90000 Yuan of value-added tax on May 5, 2001 and 100000 Yuan of consumption tax on March 8, 2002; meanwhile the taxpayer's income tax in arrears was 80000 Yuan (the scheduled period was the first quarter of 2001, and the deadline for tax payment was April 15, 2001), and value-added tax in arrears was 50000 Yuan (the scheduled period was March 2002, and the deadline for tax payment was April 10, 2002). The competent taxation organ handled the formalities of crediting against the unpaid tax with refundable tax on May 11, 2002. It is presumed that the annual interest rate of the contemporaneous current bank deposit in 2001 and 2002 was 0.72%. 1. Calculating the Total Refundable Amount The interest payable on 90000 Yuan of refundable value-added tax = 90000 x 371/365 x 0.72% = 658.65 Yuan; the interest payable on 100000 Yuan of refundable consumption tax = 100000 x 64/365 x 0.72% = 126.25 Yuan; the total refundable amount = 90000 + 658.65 + 100000 + 126.25 = 190784.90 Yuan. 2. Calculating the Total Unpaid Amount The payable fine on the 80000 Yuan of unpaid income tax in arrears = 80000 x (15 x 2% + 376 x 0.5%) = 17440 Yuan; the payable fine on the 50000 Yuan of unpaid value-added tax in arrears = 50000 x 31 x 0.5%=775 Yuan; the total unpaid amount: 80000 + 17440 + 50000 + 775=148215 Yuan. 3. As the total refundable amount is larger than the total unpaid amount, the amount actually credited against should equal the total unpaid amount, which was 148215 Yuan. The refundable value-added tax used to credit against the unpaid tax and the interest payable thereof should be 90000 + 658.65=90658.65 Yuan, and the refundable consumption tax used to credit against the unpaid tax and the interest payable thereof should be 148215-90658.65£½57556.35 Yuan, in which, the refundable consumption tax used to credit against the unpaid tax should be 57556.35/(1 + 64/365 x 0.72%)=57483.78 Yuan, and the interest payable thereof be 57556.35-57483.78=72.57 Yuan. The surplus of the refundable consumption tax should be 100000-57483.78=42516.22 Yuan. Example 2: In the above example, it presumed that the mis-paid value-added tax was 20000 Yuan, and the mis-paid consumption tax was 30000 Yuan, and other conditions remained unchanged. 1. Calculating the Total Refundable Amount the interest payable on the 20000 Yuan of refundable value-added tax = 20000 x 371/365 x 0.72%=146.37 Yuan; the interest payable on the 30000 Yuan of refundable consumption tax = 30000 x 64/365 x 0.72%=37.87 Yuan; the total refundable amount = 20000 + 146.37 + 30000 + 37.87 = 50184.24 Yuan. 2. Calculating the Total Unpaid Amount the total unpaid amount = 80000 + 17440 + 50000 + 775 = 148215 Yuan. 3. As the total refundable amount is smaller than the total unpaid amount, the amount actually credited against should equal the total refundable amount, which was 50184.24 Yuan. The unpaid income tax credited against according to the scheduled period and the payable fine on the tax in arrears should be 50184.24 Yuan, in which, the unpaid income tax credited against = 50184.24/[1 + (15 x 2% + 376 x 0.5%]=41202.17 Yuan, and the payable fine on the tax in arrears used to credit against the 41202.17 Yuan of unpaid income tax =50184.24-41202.17=8982.07 Yuan. The unpaid income tax should be 80000-41202.17=38797.83 Yuan, the unpaid value-added tax 50000 Yuan, and the surplus of the unpaid tax should be 50000 + 38797.83=88797.83 Yuan. |
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