The State Administration of Taxation ("SAT") has recently released the Announcement on Several Value-added Tax Issues Including Unifying the Criteria for Small-scale Taxpayers (the "Announcement"), with effect from May 1, 2018.
The Announcement outlines on what conditions a general taxpayer may switch its status into a small-scale taxpayer; procedures for taxpayers to handle the switch registration; connection between tax calculation methods applicable before and after the switch registration; how to deal with the situation where a taxpayer registering the switch has not yet declared the deducted or retained amount of input VAT; how to deal with the discount, cancellation or return, arising after the swift registration, for sales activities and purchases made when the taxpayer registering the switch was a general taxpayer; issues concerning the issuance of VAT invoices by a taxpayer registering the switch; on what conditions a taxpayer that has switched its status into a small-scale taxpayer could register itself as a general taxpayer again; and issues regarding the issuance of VAT invoices by general taxpayers after the adjustment to the tax rate. Furthermore, the Announcement clearly specifies that a general taxpayer may opt to switch its status into a small-scale taxpayer, provided that two requirements are fulfilled, one of which reads "its cumulative taxable sales amount for consecutive 12 months or four quarters does not exceed CNY5 million, before the date of switch registration", or choose to remain as a general taxpayer.