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Many small-scale taxpayers ask: If our quarterly revenue is under RMB 300,000, can we issue Special VAT Invoices for just a few transactions? And can some of these invoices be at 1% and others at 3%?

Here is the simple answer: Yes, you can. 

You have flexibility. You can decide, transaction by transaction, whether to apply the 1% rate, the 3% rate, or full exemption.

According to Announcement No. 1 of 2023, here is how it works:

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Ⅰ.The "Under 300k" Rule

If your total quarterly revenue is under RMB 300,000, at present, your income is usually exempt from VAT.

• However, this exemption only applies to Normal Invoices.

• If you issue a Special Invoice, you must pay tax on that specific amount, even if your total revenue is under the threshold.

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Ⅱ. Mixing 1% and 3% Special Invoices

You are allowed to choose which tax rate to apply to cetain transactions when issuing Special Invoices.

• To issue a 1% Special Invoice: This is the standard reduced rate.

• To issue a 3% Special Invoice: You can choose to waive the reduced rate for a specific transaction.

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III. Practical Example

Imagine your total quarterly revenue is RMB 250,000.

• Client A needs a Special Invoice: You invoice them RMB 50,000 at 1% .

• Client B needs a Special Invoice: You invoice them RMB 30,000 at 3% (you choose to waive the 1% rate for this client).

• Client C is fine with a Normal Invoice: You invoice them RMB 170,000 (Tax-Free) .

Result: You only pay VAT on the RMB 80,000 worth of Special Invoices (RMB 50k at 1% + RMB 30k at 3%). The rest 170k is VAT exempt.

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Have questions about your specific situation? Call our hotline at 86+189 1629 8482 (English service available).

Set up in 2009  Focus on Tax& Accoounting  +86 189 1629 8482  wcx@ruanyinchina.com