What is tax credit rating in China?
The tax credit rating is a system used by Chinese tax authorities to evaluate the tax behavior of corporate taxpayers over a certain period. This rating system aims to encourage enterprises to pay taxes by the law and improve the efficiency of tax collection and management. It is also an essential part of building a social credit system. The tax credit rating not only reflects the tax compliance of enterprises but may also affect their credit status in economic activities such as financing, government procurement, and bidding.
Classification of tax credit ratings
Tax credit ratings in China are divided into five levels: A, B, M, C, and D. Each level has its specific evaluation criteria and incentives or punitive measures.
A-Level Credit
The A level is the highest credit rating, granted to taxpayers with a score of 90 or above. A-level taxpayers can enjoy a variety of incentives, including public announcement of their names, the ability to obtain a larger amount of VAT invoices at one time, and access to green channel services. However, if a company has tax violations, such as tax evasion or arrears, it will not be eligible for an A-level rating.
B-Level Credit
B-level taxpayers have an annual evaluation indicator score between 70 and below 90. For B-level taxpayers, tax authorities implement normal management and may provide guidance on tax policies and management regulations.
M-Level Credit
The M-level credit is for newly established enterprises and enterprises with no business income during the evaluation year but with a score of 70 or above. These enterprises have not committed any breaches of trust, thus they are applicable for the M-level tax credit.
C-Level Credit
C-level taxpayers have an annual evaluation indicator score between 40 and below 70. For C-level taxpayers, tax authorities will strictly manage according to the law and may take specific management measures.
D-Level Credit
The D level is the lowest credit rating, with a score of 40 or below or directly determined for taxpayers with serious tax violations. D-level taxpayers will face punitive measures, including public disclosure of names, restrictions on invoice use, strengthened tax assessments, and increased supervision frequency.
Impact of Tax credit ratings
The impact of tax credit ratings on enterprises is multifaceted. A-level and B-level taxpayers can enjoy more conveniences and incentives, while C-level and D-level taxpayers may face more restrictions and regulation. Moreover, tax credit ratings are essential to a company's credit and may affect its competitiveness in the financial market and government projects.
Tax credit repair
If taxpayers are downgraded for certain reasons, they can repair their tax credit by correcting violations and fulfilling legal obligations. Tax authorities determine the tax credit evaluation results for the previous year in April and provide taxpayers with self-query services. If taxpayers disagree with the evaluation results, they can apply for re-evaluation.
In summary, tax credit rating is a dynamic system closely related to enterprise tax compliance. It helps improve tax compliance and is an important way for enterprises to establish a good credit record in the market economy.
