1. Policy Overview

The government has introduced the immediate tax refund policy for embedded software value-added tax (VAT) to encourage the development of the software industry. For eligible embedded software products, the portion of VAT that exceeds 3% can be refunded. In other words, when companies invoice for these products, they apply a tax rate of 13%, but only need to pay 3% in tax, with the excess refundable. This policy effectively reduces the tax burden on companies, but there are still many questions regarding its implementation. Below, we will interpret the key points of the policy and the application process in a simple and understandable manner.

2. Who Can Benefit from This Policy

1. Company Identity Threshold

First, your company must be a general VAT taxpayer.

2. Product Qualification Requirements

Your software product must have an “identity card”—either a “Computer Software Copyright Registration Certificate” or a “Software Product Registration Certificate”.

3. Financial Accounting Standards

Companies must clearly distinguish between the costs and revenues of hardware and software:

Costs of hardware and software must be accounted for separately.

Companies engaged in mixed operations must clearly delineate the revenues and costs of immediate tax refund projects from general projects.

3. How is the Tax Refund Calculated?

1. Determine Software Sales AmountEmbedded software sales amount = Total sales of software and hardware – Hardware sales amount

Determining the hardware sales amount follows a sequence:

First, use the average selling price of similar hardware from the company’s most recent period.

If there is no self-set price, refer to the average market price of similar hardware.

Finally, use the taxable price composition: Hardware cost × (1 + 10%).

Tip:It is recommended that companies establish an internal hardware pricing directory to avoid needing to re-determine prices each time.

2. Allocate Output Tax and Input Tax

Calculating output tax is straightforward: Software sales amount × 13%

Allocating input tax is more complex:

Special input tax (e.g., testing instruments, development software license fees) can be fully included in software input.

Common input tax (e.g., utilities, rent) must be allocated proportionally, with options to choose:

Sales amount proportion method

Actual cost proportion method Important Note:Once a method of allocation is selected, it cannot be changed within a year and must be filed in advance.

3. Calculate Actual Tax Refund Amount

This is done in two steps:

First, calculate the taxable amount for the software portion = Software output tax amount – Software allocated input tax amount.

Then calculate the immediate tax refund amount = Taxable amount for software portion – (Software sales amount × 3%).

4. Complete Operational Process Analysis

1. Policy Filing (Must be completed before the first application)

Steps for electronic tax bureau operation:

Log in and go to “I want to handle tax—Tax reduction—Tax reduction filing”

Fill out the “Enjoy Immediate Tax Refund Policy Situation Form”

Upload a scanned copy of the “Computer Software Copyright Registration Certificate”

Submit and wait for review (usually 3-5 working days)

Experience Sharing: It is recommended to check in advance whether the certificate is valid and if the information matches the company.

2. Daily Accounting Management

Invoicing Requirements:

Immediate tax refund projects must be invoiced separately.

It is recommended to note “Embedded Software Immediate Tax Refund” in the invoice remarks.

Accounting Requirements:

Establish a dedicated account for immediate tax refund projects.

Add a “jzt” identifier for software-related input in the tax system.

Organize monthly documentation for hardware pricing basis, cost allocation tables, etc.

3. Tax Refund Declaration (Monthly or Quarterly)

Key Points for Filling Out the Declaration Form:

Appendix 1: Immediate tax refund sales amount/output tax fill in column 6.

Main Form: Immediate tax refund data filled in columns 8-10 separately.

Appendix 2: Immediate tax refund input transfer amount fill in column 6.

Common Issues: Many companies easily confuse the filling positions of general projects and immediate tax refund projects, so be sure to double-check.

Through this detailed interpretation, we believe you now have a clearer understanding of the immediate tax refund policy for embedded software. If you encounter specific issues during actual operations, it is advisable to consult a professional tax advisor or the competent tax authority promptly to ensure that the policy benefits can be safely and compliantly transformed into the driving force for the company’s development.