I. Business Tax and Value-added Tax Planning

Based on the actual situation of business establishments such as KTVs, concert halls and dance halls, the vast majority of enterprises or individuals engaged in the entertainment industry provide both entertainment and alcoholic beverages, food, and even catering services to consumers. According to the Provisional Regulations on Value-added Tax of the People's Republic of China*** and the Rules for the Implementation of the Provisional Regulations on Business Tax of the People's Republic of China*** and the State of China, such behavior is a mixed operation and should be subject to business tax according to the entire turnover. In order to avoid the high rate of business tax, we can consider separating the sales business from the entertainment business. The specific operation is as follows:

First, separate operation and independent accounting. That is to say, the entertainment business and the sales business are separated and operated by independent units or individuals. Assuming that the turnover of the entertainment business of Casino A in October 2012 is 1.2 million yuan, the income from the sale of beverages, alcoholic beverages and food and other goods is 3.51 million yuan (including tax), the purchase of goods 2 million yuan (excluding tax). Now Casino A sets up department B to operate the business of selling beverages, alcoholic beverages and food products, and A provides only entertainment business.

If B is a general VAT taxpayer (with VAT invoices for incoming goods). Then A should pay business tax = 120 × 20% = 24 (million yuan) (the tax rate of the entertainment business is 20%), and B should pay VAT = 351 ÷ 1.17 × 17% - 200 × 17% = 17 (million yuan), and the total of A and B is 24 + 17

= 410 (million yuan). If there is no separate business, the amount of business tax payable by A Casino = (120 + 351) × 20% = 942,000 yuan (万元). The difference between the two is 94.2

-41=532,000 yuan.

If B is a VAT small-scale taxpayer, B should pay VAT 351 ÷ 1.03 × 3% = 102,200 (yuan), A should pay business tax = 120 × 20% = 24 (yuan) (entertainment industry tax rate of 20%), A and B total 24 + 102,200 = 342,200 (yuan). But if there is no separate business, the amount of business tax payable by Casino A = (120 + 351) × 20% = 942,000 (yuan). The difference between the two is 94.2-34.22=599,800 yuan.

Secondly, the identity of the operator of the sales business is refined to be operated by individuals other than individual businessmen. According to the implementation rules of the Provisional Regulations on Value-added Tax, "other individuals whose annual taxable sales exceed the standard for small-scale taxpayers shall be taxed as small-scale taxpayers." Because the tax rates applicable to general VAT payers and small-scale taxpayers are different, the taxpayers have different status and calculate VAT differently. General taxpayers are on a credit system and small-scale taxpayers are on a levy rate.

Assuming that the purchase price of ordinary goods is A (excluding tax), the cost margin is x, as the general taxpayer and small-scale taxpayers of VAT balanced tax equation is:

A (1 + x) 3% = 17% Ax

When x = 21.429%, that is, when the cost margin = 21.429%, the two pay the same tax, when x21.429% when it is good to be a small taxpayer.

Often the cost margin of sales business in the entertainment industry is greater than 21.429%, so it is appropriate to choose small-scale taxpayers to operate sales business. For example:

B has sales revenue of 3.51 million yuan (including VAT) and purchases of goods of 2 million yuan (excluding tax). If B is a general taxpayer with VAT professional invoice, the VAT payable by B = 351 ÷ 1.17 × 17% - 200 × 17% = 17 (million yuan), and if B is a small taxpayer the VAT payable by B = (351 ÷ 1.03) × 3% = 102,233 (million yuan), and the difference between the two is 17

-10.2233 = 6.7767 ( million dollars).

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