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8 Questions to Successfully Navigate China’s Value Added Tax Reform

8 Questions to Successfully Navigate China’s Value Added Tax Reform
Last week we had our webcast “Getting a Grip on China Value-Added Tax Invoice Reform”, and we had more questions than we had time to answer live.
China VAT
Today we bring you the transcript and extra answers of the Q&A session. If you missed the webcast and would like to get a copy of the presentation and recording, click here.Is it required to implement an automated interface like Golden Tax Adaptor between Oracle AR and the Golden Tax System?
No, it is not a statutory requirement.  But it is a statutory requirement to use the Golden Tax System to issue VAT invoices. If VAT is applicable to your business or will be applicable to your business due to the VAT reform, implementing Golden Tax Adaptor or other interface program would definitely facilitate your invoicing process.
We are currently using an interface between the Golden Tax System and Oracle. Does the VAT reform also impact the Tax configuration in addition to the integration?
Yes. We didn’t talk too much on this topic, but depending on the changes you could have in your business, you may need to update your tax configuration to reflect the change. For example, set up tax codes with a new rate, change the tax recovery rate in Oracle 11i. If you are using Oracle R12, you may also need to update the tax rule setup in E-Biz Tax.

I need more details on the VAT reform, where I can get the information?
China VAT reform is an on-going process with coverage on multiple province and industries. There is a series of regulations published on the State Administration of Taxation website during the past 4 – 5 years by the state tax bureau. Different province could also have some additional policies on its own.  I would suggest that you could further consult your local tax office. ITC could also help to study your business and assess any required changes on your process and system. We are happy to help to get your company ready for such changes.

Since VAT invoices are required to be printed in a specific format in the Golden Tax system, is there any accounting entry generated that needs to be transferred back to Oracle?
As we explained, you need to transfer the information from Oracle Receivables to the Golden Tax System. This is a system to print your physical invoices.  The accounting entry will be generated and stored in the Oracle Account Receivables module, as Golden Tax system doesn’t make any accounting, only VAT invoice number is transferred back to Oracle for the purpose of cross reference.

Why do we need a separate system? Can’t this be built through custom Oracle reports?
The Golden Tax System is a mandatory system established by the Chinese government. If your organization is a registered VAT Tax Payer, you will have to generate your physical invoices through the Golden Tax System. So not using the Golden Tax System is not an option. Also, bear in mind that the same information that you enter in the Golden Tax System is the one that the government uses to reconcile your VAT reports (which need to be submitted every 2 to 3 months.)

To transfer the information from Oracle Receivables to the Golden Tax System there are two options: the standard Oracle Golden Tax Adaptor, or a customized solution such as ITC’s, where we developed a customized form to generate and export the information required by the Golden Tax System.

How long does it take to implement your solution?
IT Convergence’s bolt-on solution is available both for Oracle 11i and Oracle R12 and many of our customers are working with it, so it’s a proven solution. What we normally do with a new client is carry out a mapping of the requirements and design. Normally it takes around 2 to 6 weeks to have the solution implemented and tested (though every project is different).

What do you mean by a Sales List document, that it can be attached to the VAT invoice?  Can the Sales List document be in any format?
A Sales List document may be attached with the VAT invoice if the number of detailed lines of sold item exceeds the maximum number of 8 lines on the VAT invoice. The Sales List document can be prepared and printed using the Golden Tax System. Alternatively, you can manually prepare the Sales List document outside the system in the format specified by the State Tax Bureau. The manually prepared Sales List document should be stamped with the company chop.

Does the Golden Tax System validate the tax decision already performed in Oracle or other ERPs?
No. To clarify your question, actually all the client software of the Golden Tax System is connected with the system of Tax Office, so the information of each VAT invoice issued from the Golden Tax is visible to the Tax Authority on real-time basis, just in case VAT invoice get issued from the Golden Tax when the network connection is down, it is still required to upload such invoicing information to the Tax Office via Golden Tax within limited hours after the network connection is recovered.

In addition, the information of all VAT invoices issued in Golden Tax System is visible to the Tax Office via network connection, which means the tax decision is under the monitor of the local tax authority.

For more China related posts, click here, or visit our website to learn more about implementing Oracle solutions in the Asia-Pacific region.