The criteria for small-scale taxpayers shall be regulated by the competent financial and tax authorities under the State Council.

Article 12 The rate of VAT levied on small-scale taxpayers shall be 3 percent.

Any adjustment to the levy rate shall be determined by the State Council.

Article 13 Other taxpayers than the small-scale taxpayers shall apply with the competent tax authorities for qualification verification, the specific measures of which shall be formulated by the competent tax authority under the State Council.

Small-scale taxpayers with sound accounting who can provide accurate taxation information may apply to the competent tax authorities for qualification verification and not being treated as small-scale taxpayers and their tax payable shall be computed pursuant to the relevant provisions of the Regulations.

Article 14 For taxpayers importing goods, tax payable shall be computed on the basis of the composite assessable price and the tax rates prescribed in Article 2 of the Regulations. The formulas for computing the composite assessable price and the tax payable are as follows:

Composite assessable price = Customs dutiable value + Customs Duty + Consumption Tax

Tax payable = Composite assessable price x Tax rate

Article 15 The following items shall be exempt from VAT:

(1) Self-produced agricultural produces sold by agricultural producers;

(2) Contraceptive medicines and devices;

(3) Antique books;

(4) Importation of instruments and equipment directly used in scientific research, experiment and education;

(5) Importation of materials and equipment from foreign governments and international organizations as assistance free of charge;

(6) Articles imported directly by the organizations of the disabled for special use by the disabled; and

(7) Sale of goods that have been used by the sellers.

Except as stipulated above, VAT exemption and reduction items shall be prescribed by the State Council. Local governments or departments may not specify any tax exemption or reduction items.

Article 16 For taxpayers concurrently engaged in tax exempt or tax reduction items, the sale amounts for tax exempt or tax reduction items shall be accounted separately. If the sale amounts have not been separately accounted, no exemption or reduction is allowed.

Article 17 For the taxpayers whose sale amounts have not reached the minimum VAT threshold stipulated by the competent financial and tax authorities under the State Council, the VAT shall be exempt, and otherwise, VAT shall be fully computed and paid according to the provisions of the Regulations.

Article 18 Where the units or individuals outside of the People's Republic of China provide taxable services inside China and have not established business institutions, their agents in China shall be the withholding persons; and where any of such units or individuals has no agent in China, the purchasers shall be withholding person.

Article 19 The time of occurrence of payment obligations of VAT:

(1) For sales of goods or taxable services, it is the date on which the sale amount is received or the vouchers for collecting the sale amount are obtained. Where invoices have been issued in advance, it is the date when invoices were issued.

(2) For importation of goods, it is the date of import declaration.

The obligation of VAT withholding happens when the obligation for payment of VAT of the taxpayers occurs.

Article 20 VAT shall be collected by the tax authorities. VAT on the importation of goods shall be collected by the customs office on behalf of the tax authorities.

VAT of self-used articles brought or mailed into China by individuals shall be levied together with Customs Duty, the detailed measures of which shall be formulated by the Tariff Commission of the State Council together with the relevant departments.

Article 21 Taxpayers selling goods or taxable services shall issue special VAT invoices to the purchasers who request for special VAT invoices and the sale amounts and output tax shall be separately indicated in the special VAT invoices.

In any of the following circumstances, no special VAT invoice shall be issued:

(1) Sale of goods or taxable services to individual consumers;

(2) Sale of goods or taxable services with applicable tax exemption; or

(3) Sale of goods or taxable services by small-scale taxpayers.

Article 22 The place for payment of VAT is as follows:

(1) Businesses with fixed establishment shall report and pay tax with the local competent tax authorities where the establishment is located. If the head office and branches are not in the same county (or city), they shall report and pay taxes separately with their respective local competent tax authorities. The head office may, upon approval by the competent financial or tax authorities of the State Council or their authorized tax authorities, report and pay taxes on a consolidated basis with the local competent tax authorities where the head office is located.