How is VAT calculated?
In respect of general taxpayers, VAT is calculated by deducting the amount of VAT paid on goods and services purchased by the taxpayers in a given period from the VAT on the sale of goods and services in the same period. If the sales VAT for the current period is less than the purchases VAT for the same period, the balance may be carried forward and offset in later periods.
Sales VAT is calculated in renminbi (RMB) and may be collected by the taxpayer from the purchaser. For sales value in foreign currency, the taxpayer must use the prevailing foreign exchange rate quoted by the State to convert the sales value into RMB.