Since the beginning of this year, in accordance with the decisions and arrangements made by the Party Central Committee and the State Council, the State Taxation Administration, in conjunction with the Ministry of Finance and other departments, has successively issued a series of tax and fee preferential policies that have been extended, optimized, and innovated. In order to facilitate the timely understanding of applicable tax and fee preferential policies by business entities, the State Taxation Administration has sorted out these extended, optimized, and innovated tax and fee preferential policies and compiled guidelines for them based on the subjects eligible for benefits, the content of the preferential measures, the conditions for eligibility, and the policy basis.

Policy Content

From January 1, 2023, to December 31, 2023, the VAT Incremental Deduction Policy will be implemented according to the following provisions:

1. It allows taxpayers in the production service industry to deduct an additional 5% of the deductible input tax from the amount of tax payable. Taxpayers in the production service industry are defined as taxpayers whose sales revenue from postal services, telecommunications services, modern services, and living services accounts for more than 50% of their total sales revenue.
2. It allows taxpayers in the lifestyle service industry to deduct an additional 10% of the deductible input tax from the amount of tax payable. Taxpayers in the lifestyle service industry are defined as taxpayers whose sales revenue from living services accounts for more than 50% of their total sales revenue.

Policy Subjects

General taxpayers in the production and lifestyle service industries for value-added tax.

Application Procedure

Production service industry taxpayers who meet the requirements should submit a "Declaration of Applicability of 5% Incremental Deduction Policy" through the online tax service portal or tax service hall when applying for the 5% incremental deduction policy for the first time in the fiscal year. Lifestyle service industry taxpayers who meet the requirements should submit a "Declaration of Applicability of 10% Incremental Deduction Policy" through the online tax service portal or tax service hall when applying for the 10% incremental deduction policy for the first time in the fiscal year.

Eligibility Conditions

For other matters related to the application of the incremental deduction policy, taxpayers should follow the relevant provisions of the "Announcement of the Ministry of Finance, the State Taxation Administration, and the General Administration of Customs on Deepening the Reform of Value-Added Tax" (Announcement No. 39 of 2019 by the Ministry of Finance, the State Taxation Administration, and the General Administration of Customs), the "Announcement of the Ministry of Finance and the State Taxation Administration on Clarifying the Value-Added Tax Incremental Deduction Policy for the Lifestyle Service Industry" (Announcement No. 87 of 2019 by the Ministry of Finance and the State Taxation Administration), and other related regulations.

Policy Basis

1. "Announcement of the Ministry of Finance, the State Taxation Administration, and the General Administration of Customs on Deepening the Reform of Value-Added Tax" (Announcement No. 39 of 2019 by the Ministry of Finance, the State Taxation Administration, and the General Administration of Customs).
2. "Announcement of the Ministry of Finance and the State Taxation Administration on Clarifying the Value-Added Tax Incremental Deduction Policy for the Lifestyle Service Industry" (Announcement No. 87 of 2019 by the Ministry of Finance and the State Taxation Administration).
3. "Announcement of the Ministry of Finance and the State Taxation Administration on Clarifying the Policies for Value-Added Tax Reduction for Small-Scale Taxpayers" (Announcement No. 1 of 2023 by the Ministry of Finance and the State Taxation Administration).
4. "Announcement of the State Taxation Administration on Relevant Management Issues concerning Policies on Value-Added Tax Reduction for Small-Scale Taxpayers" (Announcement No. 1 of 2023 by the State Taxation Administration).