On February 25, 2009, the State Administration of Taxation (the "SAT") issued a Circular on Administrative Issues Concerning the Simple VAT Collection Policy (the "Circular"), effective retroactively on January 1, 2009. China's VAT reform in 2008 introduced several significant changes to the previous VAT system in China, one of which was that input VAT on fixed assets became deductible against output VAT. Due to this important change, the collection of VAT for certain goods, e.g. self-used fixed assets and secondhand goods, has been adjusted accordingly. The Circular was released to clarify certain administrative issues relating to the collection of VAT for these goods, including circumstances under which special VAT invoices or plain invoices can be issued. In addition, the Circular sets forth formulas for calculating taxable sales and VAT.
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