Taxpayer Creditworthiness Grading -- One of the Most Important Core Competitiveness of A Company. Have You Checked It Today?


Background of Taxpayer Creditworthiness Grading Policy

With the development of taxpayer creditworthiness system, a good taxpayer creditworthiness grading has become an important asset for taxpayers to participate in the market competition and ensure the safe growth of enterprises. In 2014, the State Administration of Taxation developed specific evaluation methods (State Administration of Taxation Announcement [2014] No. 40 “Administrative Measures on Taxpayer Creditworthiness (Trial Implementation)”, hereinafter referred to as the "Announcement No. 40"), intending to further strengthen the reward system of tax compliance, in order to promote the taxpayer's self-discipline, improve the taxpayer compliance, and realize hierarchical management. Along with the State Council's programmatic requirements on deepening the tax work, the taxpayer creditworthiness grading of enterprises will have a significant and far-reaching impact on the tax-related and even other daily operating matters outside the tax field.
In this article, we will provide guidance on the specific evaluation methods, evaluation process and how enterprises should maintain or even reverse to be entitled to creditworthiness rating of Grade A in daily life.

Introduction of Taxpayer Creditworthiness Grading System

The taxpayer grading system was introduced in 2003. The initial Guo Shui Fa [2003] 92 "The Provisional Measures on Administration of Grading of Taxpayer Creditworthiness" was officially released in July 2003. The document established the four main grades A, B, C and D as well as their score sections, and stipulates the corresponding assessment methods. The policy has been implemented for more than ten years and played an obvious role in strengthening the construction of social creditworthiness system. In July 2014, the State Administration of Taxation issued a new Announcement No.40 in combination with the current status of tax administration. The previous creditworthiness grading system of A, B, C and D remained, but there were some adjustments to the evaluation principles, incentive measures and punishment measures. The State Administration of Taxation Announcement [2018] No. 8 "Announcement on Matters Relating to Evaluation of Tax Creditworthiness" issued in February 2018 also set up an Grade M for newly-established enterprises, enterprises without manufacturing and business income, and enterprises applicable for the method of assessment.

On the basis of present taxpayer creditworthiness grading system, many tax policies have been made in line with it. For example, Guo Shi Jian Zhu [2019] No. 30 "Notice on Promoting the Facilitation of Business Deregistration" stipulates that only enterprises with creditworthiness rating of Grade A and B can apply the "Commitment System" for tax deregistration. Besides, Cai Shui [2018] No.70 “Notice on Tax Policies for the Refund of Overpaid VAT for Some Industries in 2018”, and Announcement [2019] No. 39 of the Ministry of Finance, the State Taxation Administration and the General Administration of Customs “Announcement on Policies for Deepening the VAT Reform” stipulate that only taxpayers of Grade A and B can enjoy the new policy of the overpaid VAT refund.

Please download 2019 China Tax Alert Issue 3 to learn more.


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