To resolve problems arising in the course of implementation, the State Administration of Taxation (SAT) announced the Circular on the Issue of Fixed Asset Input Tax Deduction on 9 September, setting out detailed regulations on the scope of fixed asset VAT input tax deduction.

Under Article 23 Section 2 of the Implementing Rules for the Provisional Regulations on Value-added Tax of the People’s Republic of China, the term “buildings” refers to houses or establishments provided for people to carry out production, living and other activities in; the term “structures” refers to man-made structures not meant for people to carry out production or live in; and the term “attachments to land” refers to mineral resources therein and plants grown on the land.

Any ancillary equipment and supporting facilities attached to a building or structure are treated as an integral part of the building or structure no matter whether they are entered into the books and calculated separately or not. And as such, their input tax may not be deducted from the output tax. Ancillary equipment and supporting facilities refer to equipment and facilities in relation to: water supply and discharge, heating, hygiene, ventilation, lighting, communication, gas supply, fire prevention, central air-conditioning, elevator, electricity, and intelligent building.