VAT Golden System has been upgraded nationwide

The VAT Golden System is the system China’s tax authority uses to ensure taxpayers’ tax compliance. As you may know, the format of VAT invoices in China is different from the majority of the world. In China, in order for a VAT invoice to be valid it must be issued through the VAT Golden Tax system. Sales-related information, such as the sales amount, tax amount, the customer’s information, and the nature and quantity of products/service are uploaded to the tax authorities automatically using the Golden Tax System. This system is also used for preparation and submission of tax returns, input VAT recognition, and so on.

Key updates

Starting the last week of October 2019 upgrades to the Golden Tax System began being rolled out region-by-region. The purpose for the system upgrade is to allow for better monitoring of taxpayers’ activities by the tax authority.

Chinese state tax authorities and local tax authorities each have their own tax systems. In the past, these systems did not exchange information; state and local tax authorities were only paying attention to the taxes they are in charge of. When the upgrade to the Golden Tax system is complete, the two tax systems will be combined into one, which means the tax information will be able to be exchanged between the state tax authorities and local tax authorities.

Impact of the changes

Once the bugs that may occur during the transition are worked out, in addition to allowing for tax information exchanges, the upgraded Golden Tax System is expected to impact the following:

The time spent by taxpayers on tax matters could be significantly reduced;
The tax authorities will be able to comprehensively monitor the taxpayer’s business status and tax compliance;
Tax information will be more transparent;
Tax data from different tax returns will be easily collected and exchanged;
Information about tax offenders will be published via official media;
Tax authorities’ ability to deal with tax evasion will be improved

BDO comment

Based on our practical experience, various unpredictable issues can be expected for a few days right after the system upgrade. Once the upgrade is complete, the tax authorities will be better able to understand taxpayers’ operation status and business activities by comparing their submitted historical tax data. Therefore, taxpayers should consider seeking professional tax advice to ensure they don’t run into any problems as a result of the system upgrade. We have the expertise to help you with all your tax needs – please don’t hesitate to contact us for assistance.

Gordon Gao
gordon.g@bdo.com.cn

Janet Liu
janet.liu@bdo.com.cn