Sale of Food Not for Immediate Consumption Now Subject to VAT

Sale of Food Not for Immediate Consumption Now Subject to VATStarting next year, the sale of food not for immediate consumption from hotels and food & beverage (F&B) businesses will no longer be subject to business tax (BT), according to China’s State Administration of Taxation (SAT).

The “Announcement on Tax Issues Related to Food Sale by Taxpayers Engaging in Hotel and F&B Businesses (SAT Announcement [2011] No.62)” was released on November 24. It clarified that, where taxpayers engaging in hotel and F&B businesses sell food that cannot be consumed on the spot, such food sales shall be subject to value-added tax (VAT), instead of BT. Individuals and non-enterprise entities that engage in the aforementioned VATable food sale activities – as well as enterprises that do not frequently conduct the aforementioned VATable food sale activities – may pay VAT at the rate of 3 percent (e.g. the VAT rate for small-scale taxpayers).

The new Announcement will replace the “Circular on Issues Related to Turnover Tax Imposition from F&B Businesses (guoshuifa [1996] No.202),” which stipulated that, where F&B businesses and hotels conduct F&B BTable activities and sell goods at the same time, the sale of goods shall also be calculated as BTable revenue, regardless of whether the goods can be consumed on the spot or not.

Announcement No.62 will take effect on January 1, 2012.

For professional assistance in China contact Rosario Di Maggio at rosario.dimaggio@dezshira.com or visit www.dezshira.com

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China Briefing hosts a wealth of business intelligence on legal, tax, and operational issues in China from a practical perspective. Knowledge, expertise and commentary for China Briefing is regularly contributed by Dezan Shira & Associates´ professional legal and tax staff. Currently located in Futian district, Dezan Shira & Associates has been assisting foreign companies in Shenzhen for 22 years.

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