Every newly-established China Wholly Foreign Owned Enterprises (WFOE or WOFE) will always face such a question: Should our company registered as a small-scale taxpayer or a general taxpayer? For this question, you can choose based on your specific situations and the following contents!
I. Recognition criteria for China WFOE's general taxpayers
In accordance with the regulations of the Ministry of Finance and the State Administration of Taxation, taxpayers are divided into general taxpayers and small-scale taxpayers.
Taxpayers whose annual taxable sales amount subject to VAT (hereinafter referred to as the “annual taxable sales amount”) exceeds the standard as prescribed by the Ministry of Finance and the State Administration of Taxation are defined as general taxpayers, and taxpayers whose annual taxable sales amount does not exceed the said standard are defined as small-scale taxpayers.
In accordance with the relevant policies and regulations, the criteria for converting to general taxpayers are:
1.Taxpayers engaged in the production of goods or provision of taxable services, or engaged principally in the production of goods or provision of taxable services, with an annual taxable sales amount exceeding RMB 500,000;
2.Taxpayers with an annual sales amount of taxable services exceeding RMB 5,000,000;
3.Taxpayers engaged in other industries have an annual taxable sales amount exceeding RMB 800,000.
II. Can a China WFOE not exceeding the standards for small-scale taxpayers become a general taxpayer?
In accordance with the regulations of the Ministry of Finance and the State Administration of Taxation, if a taxpayer whose annual taxable sales amount does not exceed the prescribed standard has a sound accounting system and is able to provide accurate tax-related materials, it may apply to the competent tax authority for the qualification of a general taxpayer and be treated as a general taxpayer.
Sound accounting system means the capability of setting up account books according to the uniform accounting system of the State and conducting accounting on the basis of lawful and valid vouchers.
Therefore, if an enterprise fails to exceed the standards for small-scale taxpayers yet has a sound accounting system and is able to provide accurate tax-related materials, it may also apply to become a general taxpayer.