April 2019 - VAT input on domestic transportation

According to the Public Notice (2019) No. 39 jointly issued by SAT, the Ministry of Finance and General Administration of Customs on March 20th, 2019, transportation tickets including train tickets, air tickets and passenger tickets will be VAT deductable from April 1st , 2019 for companies.

For taxpayers who have not obtained special VAT invoices, input tax shall be calculated temporarily in accordance with the following formula:

Item

Tax rate

The net value (tax excluded)

Road and waterway passenger tickets

3%

Ticket value/(1+3%)*3%

Railway passenger tickets

9%

Ticket value/(1+9%)*9%

e-ticket itinerary receipt for air transport

9%

(Airfare+ fuel surcharge) /(1+9%)*9%

General VAT e-invoices

 

Tax amount indicated on the invoice

 

Matters need attention

  • Only tickets with passenger's identification information indicated are considered as VAT deductible, which means taxi tickets, bus tickets and passenger quota invoices are not creditable.
  • Business trip tickets specially used for personal consumption, entertainment activities or collective welfare are not creditable for VAT deduction.
  • Only the invoices issued after April 1st , 2019 are valid for deduction.

Mazars’ Recommendation

  • In light of the complexity of claiming VAT on domestic transportation, and the difficulty to collect the accurate information, we propose to update the current expense claim in detailling the following breakdown:
    • Road and waterway passenger tickets ;
    • Railway passenger tickets
    • Airtickets (e-ticket itinerary receipt for air transport);
    • Taxis with e-invoices.
  • Implementing these solutions would require the full support of employees and/or administrative staff.

 References:

  • Ministry of Finance, State Administration of Taxation, Customs [2019] no.39 – Announcement on Deepening the reform of VAT (link here  in Chinese)

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