Legal News: “ZERO VAT” Policy for Certain Small-Scale Taxpayers

Legal News: “ZERO VAT” Policy for Certain Small-Scale Taxpayers

I. Legal News:

“ZERO VAT” Policy for Certain Small-Scale Taxpayers

In China, VAT taxpayers are divided into general taxpayers and small-scale taxpayers1, and small-scale taxpayers are mainly small and micro enterprises. To support small and micro enterprises during the Covid-19 pandemic, Chinese Premier Li Keqiang stated in the Government Work Report on March 5, 2021 that PRC government will further issue tax relief measures on small and micro enterprises.

Further official steps were recently taken to respond the Government Work Report. On March 31, 2021, the Ministry of Finance and the State Tax Authorities jointly issued a tax exemption policy (the “Policy”) and the main points of the Policy are as follows:

 Which tax can be exempted under the Policy?
Only VAT, not including other taxes like corporate income tax.

 Who is entitled to enjoy the Policy? 
Only (1) small-scale taxpayers with (2) monthly sales ≤ RMB 150,000 yuan

 When to apply the Policy? 
From April 1, 2021 to December 31, 2022


II. Case:

Trademark Infringement: LEGO Wins in Appeal A Compensation Amounting to Ten Times the Initial Awarded Amount

Recently, Guangdong Higher People’s Court made a judgement of second instance in which the compensation to be paid by the Chinese infringer was increased from RMB 3 million yuan (judgement of first instance) to RMB 30 million yuan for its infringement of several “LEGO” trademarks owned by a famous Danish toy company.

For the compensation amount, the court of first instance previously imposed a compensation amounting to RMB 3 million yuan based on article 63 (3) of PRC Trademark Law applicable during the litigation, in which if it is hard to determine the right owner’s actual losses or the infringer’s illegal revenueobtained due to the infringement, the Court shall, based on the actual circumstance of infringement, bring in a verdict of amount up to RMB 3 million2.

The Court of second instance disagreed with such compensation as evidence collected is sufficient to fix the infringer’s illegal revenue. Accordingly, 63 (3) shall not be applied in this case.

When determining the compensation amount, the court of second instance also considered the following factors:

(1) The defendant’s illegal revenue is huge, and RMB 30 million claimed by LEGO is a reasonable amount.
Based on evidence collected, the illegal revenue of the Chinese infringer is more than RMB 160 million yuan. RMB 30 million claimed by LEGO only accounts for less than 19% of such illegal revenue.3

(2) The malicious intention of the infringer is obvious. The infringer has been keeping infringing LEGO’s trademarks for years.

(3) “LEGO” is a well-known trademark, and the infringer violates LEGO’s exclusive right to use its well-known trademark.

It is reported to be a typical case of continuously better protecting well-known trademark as well as improving IP sanction system in China.



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1. Two taxpayers are previously divided based on specific industry/respective annual taxable revenue, etc. For a general taxpayer, it is not freely to change back to a small-scale taxpayer.

2. Currently PRC Trademark Law amended.
According to the Revision of PRC Trademark Law 2019 which came into force as of November 1, 2019, if it is indeed hard to determine the right owner’s actual losses or the infringer’s illegal revenue obtained due to the serious malicious infringement, the People’s Court may decide a compensation of an amount up to RMB 5 million (to replace the prior criteria of RMB 3 million).

3. According to article 63 (1) of PRC Trademark Law (2013 version), the amount of compensation shall be determined based on the right owner’s actual losses. If it is hard to determine the right owner’s actual losses, it can also be determined based on infringer’s illegal revenue. Where the rights of trademark have been infringed in a malicious way or the case is serious, the amount of compensation can be up to 3 times of infringer’s illegal revenue. (Revision in 2019 version amended into 5 times)


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