Basically, there are two kinds of VAT taxpayers in China. One is general VAT taxpayer(General), another is Non-general VAT taxpayer(Non-general). At the beginning, each new company can chose to be one of the two.
For Non-general, the domestic sales VAT is calculated on collection tax rate. No input VAT can be deducted from sales VAT. Common collection tax rate is 3%, the sales invoice just can be issued to clients in this rate.
For general VAT taxpayer, the domestic sales VAT is calculated on VAT tax rate. Common rates are 13%, 9%, 6% for general VAT taxpayer depend on the transactions’ nature. The input VAT can be deducted from the sales VAT.
It must be noted that when continued 12 months revenue is more than 5million, a Non-general VAT taxpayer must be changed as a general VAT taxpayer. Also, general VAT taxpayers can choose one time in one year to be a Non-general VAT taxpayer when 12 months revenue less than 5 million.
In practice, the VAT calculation may be a little complicated as there are many VAT favorable policies. Don’t worry about it, Ruanyin Accounting team can help you:)