Financial And Tax Treatment Exempted From VAT
Q: should the value added tax directly be exempted from tax be incorporated into the corporate profits to pay corporate income tax? Do we need accounting treatment?
Answer: according to the regulations of the Ministry of finance of the State Administration of Taxation on the reduction and return of the turnover tax and the collection of income tax on corporate profits (fiscal and tax [1994]74 number), the turnover tax (including the withdrawal of the levy and withdrawal) and the return of the enterprise shall be incorporated into the profits of the enterprise other than those specified by the State Council, the Ministry of Finance and the State Administration of Taxation, and the enterprise income tax shall be collected according to the regulations. For direct reduction and immediate withdrawal, the enterprise income tax should be incorporated into the current year's profits. Therefore, the value-added tax directly exempted from the enterprise should be incorporated into the company's profits to pay corporate income tax. In accordance with the provisions of the circular on accounting treatment for the reduction and return of turnover tax ([1995]6), for the direct deduction of VAT, we should debit the "payable tax payable - value added tax (exemption and Exemption)" subject, credited the subject of "subsidized income", and add a "tax relief" item (the 8 bank) under the item "payable to the detailed list of value-added tax" and "paid taxes", reflecting the value added tax deductions issued by enterprises according to the regulations, and should be based on the records of "payable tax payable VAT" subjects.
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