On Definition,Systematic Classification and Legislative Improvement of Non-taxable Transactions for VAT Purpose
The VAT taxable transactions or non-taxable transactions determine whether the VAT liability arises or not,and are the basis of other VAT legal regimes.Due to various deficiencies in the current regulations regarding the constitutive elements of taxable transactions in China's VAT law and multiple issues in defining non-taxable transactions,including the inaccurate delineation of certain non-taxable transactions,misalignment between non-taxable and exempt transactions,overly broad scope of trans-actions deemed taxable,and lack of systematic classification in defining non-taxable transactions,there is a need to enhance the certainty of legal application and align with the direction of tax reform aimed at reducing indirect tax burdens.Drawing upon theories of VAT on transactions and value addition,taxa-tion of business activities,considerations of tax administration efficiency,and beneficial legislative ex-periences from abroad,further delineation of taxable transactions within the VAT law is warranted.This entails incorporating the definition of non-taxable transactions within it and implementing systematic classification,including four types:non-commodity transfers,non-service provisions,gratuitous transfer of goods or provision of services,and non-business activities.Accordingly,this involves accurately defining certain non-taxable transactions,rectifying misalignments between non-taxable and exempt transactions,and narrowing the scope of deemed taxable transactions.
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