1. Termination breach penalty is not subject to VAT.
2. If the house is used for production and operation, the input VAT can be deducted from obtaining a special VAT invoice.
Policy basis: Condor Heroes Mobile Games
The liquidated damages as extra-price charges in the Provisional Regulations on Value Added Tax and the detailed rules for implementation have specific connotations, which are less than the liquidated damages stipulated in the Contract Law. Liquidated damages must meet the following three conditions at the same time to constitute an out-of-price expense, which in turn results in a VAT tax liability.
First, there is a corresponding price. The so-called out-of-price expenses are essentially additional costs incurred due to the price and have obvious non-independence. Out-of-the-money expenses are caused by the price, and the existence of the price is a prerequisite. Without the price, there is no out-of-the-money expense. The out-of-the-money expense without the price is a source of water and no capital. Expenses that do not have any dependency on the price cannot be called out-of-price expenses, and therefore cannot be taxed as VAT income. It can also be understood in this way that the price and the out-of-price expenses constitute the consideration for the sale of goods or taxable services at the same time, only because some of the considerations occur in a special way, due to special considerations, they appear as out-of-price expenses, but only the price The existence of out-of-price expenses is only meaningful in order to create tax obligations together with the price.
Second, there is a corresponding causal relationship with the performance object of the price. The acquisition of liquidated damages must have a direct or indirect causal relationship with the sale of goods or taxable services, otherwise it does not constitute extra-price charges in value-added tax. Because if there is no corresponding causal relationship with the performance object of the price, it means that it is not caused by the price, and there is no mention of the so-called out-of-price expenses.
Third, charge the buyer. The liquidated damages must be collected from the purchaser. The liquidated damages collected from other third parties (except those with related or debt obligations) or from the supplier also do not constitute so-called out-of-price expenses.