(1) Composition of contract income
The construction contract criterion divides the contract income into two parts. One is the initial income agreed in the contract, that is, the total contract amount initially agreed in the contract signed by the construction contractor and the customer, which constitutes the basic content of the contract income; The second is the income from contract changes, claims and rewards. These two parts of income should be treated as main business income. In terms of tax treatment, income from contract changes, claims, rulings, etc. It should be levied as a turnover tax as an extra-price fee. In terms of enterprise income tax, it should also be treated as income from main business. It can be seen that accounting and taxation are generally consistent in the composition of contract income.
(2) Relevant provisions of accounting standards on the recognition and measurement of contract income.
Based on the principle that substance is more important than form, accounting standards require that contract income be recognized and measured according to different situations. The construction contract standard stipulates that if the result of the construction contract can be estimated reliably, the enterprise shall confirm the contract income and contract expenses according to the completion percentage method on the balance sheet date. The percentage of completion method refers to the method of confirming income and expenses according to the completion schedule of the contract. (1) The criteria for determining the reliable estimation of fixed-cost contract results refer to meeting the following conditions at the same time: the total contract revenue can be measured reliably; The economic benefits related to the contract are likely to flow into the enterprise; The actual contract cost can be clearly distinguished and reliably measured; The completion schedule of the contract and the expenses to be incurred in completing the contract can be reliably determined. (2) The criterion that the results of cost-plus contracts can be reliably estimated means that the following conditions are met at the same time: the economic benefits related to the contract are likely to flow into the enterprise; The actual contract cost can be clearly distinguished and reliably measured.
If the results of the construction contract on the balance sheet date cannot be reliably estimated, the accounting emphasizes on the risks that may occur in the operation of the enterprise, and according to the extent to which the money expected to be recovered or to be recovered can make up for the costs that have already occurred, part of the construction contract income is confirmed or not. That is: (1) If the contract cost can be recovered, the contract income shall be recognized according to the actual recoverable contract cost, and the contract cost shall be recognized as the contract expense in the current period; (2) If the contract cost cannot be recovered, it will be recognized as the contract cost immediately when it occurs, and the contract income will not be recognized.
(3) The relevant provisions of the tax law on the recognition and measurement of contract income and their differences from accounting treatment.
1, the provisions of the tax law on the tax basis of turnover tax on construction contracts and their differences from accounting treatment
In terms of taxation, the confirmation and measurement of contract income will involve the identification of the types of turnover tax applicable to construction contract income, the special provisions on the time when tax obligations occur and the measurement of tax basis.
(1) Determination of Applicable Taxes and Division of Tax Basis for Different Taxes
The business contents stipulated in the construction contract include two categories: the first category, manufacturing large-scale machinery and equipment, vehicles, etc. ; The second category provides services such as construction, installation and repair. Generally speaking, the first kind of business income generates the tax obligation of value-added tax, and the second kind of business income generates the tax obligation of business tax. However, there are still some special regulations and problems.
1. In the first type of business activities, if a manufacturing enterprise provides installation services while manufacturing large-scale machinery and equipment, it shall meet all the following conditions in accordance with the Notice of State Taxation Administration of The People's Republic of China, People's Republic of China (PRC) on Taxpayers Providing Value-added Services while Selling Self-produced Goods (Guo Shui Fa [2002]117). Value-added tax is levied on the income from selling self-produced goods and providing VAT taxable services, and business tax is levied on the income from providing construction services (excluding the income from self-produced goods and VAT taxable services that should be paid according to regulations): ① It has the construction (installation) qualification approved by the construction administrative department; (2) When signing the construction contract or subcontract of the construction project, separately indicate the construction labor price. If the above conditions are not met at the same time, value-added tax will be levied on all the income obtained by taxpayers, and business tax will not be levied. For manufacturers who meet the above two conditions at the same time, there is a process of decomposing the accounting "main business income" into two parts: VAT taxable sales and business tax taxable turnover according to the contract.
Second, in the second kind of business activities, the applicable taxes of repair and replacement business income must be correctly divided. China's "Provisional Regulations on Value-added Tax" stipulates that units that provide processing, repair and replacement services in China shall pay value-added tax. In the Detailed Rules for the Implementation of the Provisional Regulations on Value-added Tax, it is interpreted as: "The repair and replacement mentioned in the regulations refers to the business of repairing damaged goods and restoring them to their original state and function." It can be seen that if the object of repair and replacement is goods or movable property, the corresponding business income will be subject to VAT. "People's Republic of China (PRC) and State Taxation Administration of The People's Republic of China on printing and distributing
Notice of (Trial Draft) (Guo Shui Fa [1993] 149) is interpreted as: "Repair refers to the engineering operation of repairing, strengthening, maintaining and improving buildings and structures to restore their original use value or extend their service life". It can be seen that if the object of maintenance is buildings and structures such as real estate, then the corresponding business income will be subject to business tax. However, in practical work, there is a problem that goods are difficult to distinguish from buildings and structures, such as some special industrial pipelines or a continuous maintenance activity, which involves both goods and buildings, and the agreed labor service is a total contract income. At this time, it is often difficult for taxpayers to determine and divide the applicable taxes and their taxable income. Because the corresponding value-added tax and business tax are collected by the national tax and local tax departments, and the business tax is generally paid in the place where the labor service occurs, taxpayers should communicate with the competent tax authorities in advance to effectively identify and divide the tax under similar circumstances.
Third, if commercial enterprises provide installation services while selling goods to owners, contract income will be mixed with value-added tax. Then, if the construction and installation enterprise "contracts and materials" to collect the price from the owner, what tax is applicable? At present, there is no dispute about whether business tax is levied on the operating income obtained by construction enterprises engaged in civil engineering and other construction operations and decoration operations. The problem is that installation enterprises not only purchase equipment and other commodities for owners, but also provide installation services. Enterprises usually think that they should pay contract income and business tax from their own industry nature and ownership. However, the national tax authorities often require the contract income to pay VAT on the grounds that Article 5 of the Detailed Rules for the Implementation of the Provisional Regulations of the People's Republic of China stipulates that a sales activity involving both goods and non-taxable services is a mixed sales activity. The mixed sales behavior of enterprises, enterprise units and individual operators engaged in the production, wholesale or retail of goods is regarded as the sale of goods, and value-added tax is levied; The mixed sales behavior of other units and individuals is regarded as the sales of non-taxable services, and no value-added tax is levied. The enterprises, business units and individual operators engaged in the production, wholesale and retail of goods mentioned in the first paragraph of this article include enterprises, business units and individual operators mainly engaged in the production, wholesale and retail of goods and engaged in non-taxable services. The Notice of the Ministry of Finance of People's Republic of China (PRC), State Taxation Administration of The People's Republic of China on Several Policies and Provisions on Value-added Tax and Business Tax (Caishui [1994] No.26) interprets "mainly engaged in the production, wholesale or retail of goods and concurrently engaged in non-taxable services" as: it means that the annual sales amount exceeds 50% of the taxpayers' annual sales of goods and the turnover of non-vat taxable services, and the turnover of non-vat taxable services is less than 50%. In addition, some installation activities include lofting, blanking, forming and welding of local parts, which are similar to manufacturing activities. Therefore, the national tax department often believes that as long as the price of purchased equipment exceeds 50% of the total price, it is considered that the installation enterprise is essentially an enterprise that mainly sells goods, supplemented by installation, and the mixed sales provided should be subject to VAT. As China has not yet included the construction industry in the scope of value-added tax, there are objectively different understandings of this kind of business in theory, regulations and practice, as well as different understandings between tax-paying enterprises and even national taxes, so enterprises should handle it cautiously.
(2) The time when the tax obligation occurs
In the construction contracts of large machinery, equipment and vehicles, sales methods and loan settlement time are often specially agreed. Common contracts include installment payment contracts and advance payment contracts. The Detailed Rules for the Implementation of the Provisional Regulations of the People's Republic of China on Value-added Tax stipulates that if the goods are sold by stages, the tax payment obligation occurs on the payment date agreed in the contract; If the goods are sold in advance, the tax obligation occurs on the day when the goods are issued. In the former way, if the accounting income is confirmed according to the completion schedule, the accounting income does not constitute the basis for VAT taxation. On the collection date agreed in the contract, the seller must confirm taxable sales according to the provisions of the tax law, no matter when the accounting income is confirmed in accounting and whether the buyer pays the subcontract. If the accounting income is confirmed in other periods, taxable sales shall not be declared repeatedly. In addition, if the seller and the buyer signed an installment payment contract, but the seller issued a special VAT invoice to the other party according to the total sales price when receiving the first payment, then the tax obligation should be generated at one time according to the par value, not the installment payment date agreed in the contract. There is still a difference between this time and the confirmation time of accounting income. In the latter way, the accounting income confirmed according to the completion schedule does not become the tax basis of value-added tax, and the tax law stipulates the delivery date as the time when the tax obligation occurs, which is consistent with the tax principle of value-added tax.
With regard to the time when the taxable services of business tax such as construction, installation and maintenance occur, the Notice of State Taxation Administration of The People's Republic of China, Ministry of Finance of People's Republic of China (PRC) on Several Policy Issues Concerning Business Tax in Construction Industry (Caishui [2006] 177) stipulates that taxpayers shall sign a written contract with the contracting-out unit to provide taxable services in construction industry, if the payment date is clearly stipulated in the contract (including the provision of raw materials, power and other materials, excluding the advance payment of the project price). This is different from the accounting income confirmed according to the completion schedule, both in time and amount.