China Clarifies VAT Input Tax Deduction Rules for Mixed-Use Assets

• China’s MOF and SAT clarified VAT input tax deduction rules for non-taxable, tax-exempt, and mixed-use long-term assets.
• Input VAT on items used only for non-taxable transactions, VAT-exempt activities, employee welfare, or personal consumption cannot be deducted.
• For long-term assets used for both taxable and non-creditable activities, input VAT must be allocated and adjusted based on revenue shares or usage ratios.
• Capitalized transformation expenses on long-term assets also require annual VAT adjustments during the mixed-use period.

Source: knowledgenavigator.pwc.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

---

---