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UPDATED: July-20-2009 NO. 29 JULY 23, 2009
Breaking the Ice

Applying for Export Tax Rebates In China

Applying for Export Tax Rebates In China
By RICHARD HOFFMANN
- Sea Ice Causes Huge Losses in
As the world financial crisis has taken hold, China's Central Government moved to Fishing
- Sea Ice Forecast to Expand
increase the value-added tax (VAT) refund rates on several industries in an effort to
- Rebuilding 'Qiang People Valley'
boost production. For example, China has increased the tax rebate on textiles at least
- Remembrance and Hope
Assistance From A four times over the past six months, most recently increasing the rate to 15 percent from
Distance - The People of Honor and Duty
14 percent in February. In October of last year, the Ministry of Finance raised export tax
China joins international relief Most Popular
efforts in Haiti with a powerful rebates on 2,486 different types of products, an estimated one quarter of all exports
sense of mission listed by Chinese customs authorities. - Ballet Blooming

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- The Tao of Weiqi
So exactly who qualifies for export tax rebates? There are two important concepts to
- Post-Wenchuan Quake
understand: the "exemption, deduction and refund" method, and the "maximum Reconstruction
refundable amount." - Heavenly Hainan

Subscribe Now >> The exemption, deduction and refund method and formula are generally applicable only
Expert's View
to production enterprises qualified as general taxpayers (there is no refund for small-
scale taxpayers), which are either directly engaged in export or which consign goods to
World other import and export enterprises for export.
Nation
Exemption, deduction and refund are defined as:
Business

Finance 1) Exemption: Goods which are exported by production enterprises either directly or on
Market Watch consignment through foreign trade companies are exempted from output VAT.
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2) Deduction: This applies to enterprises whose self-produced goods are both exported
North American Report
(directly or through export agents) and sold domestically. The input VAT credit on
Forum materials purchased for the production of export goods is offset against the output VAT
on domestic sales.
Government Documents

Arts & Culture 3) Refund: This applies if there is excess input VAT above that amount retained for
credit (to be carried forward).
Expat's Eye

Health Exemption, deduction and refund calculation

Science/Technology
VAT Payable = Output VAT - Input VAT + Non-Refundable VAT
Lifestyle
Non-Refundable VAT=(Export- Imported Duty Free Raw Materials) × (Levy Rate -
Books
Refund Rate)
Movies
If VAT payable is a positive figure, then the enterprise will have to pay VAT to the tax
Backgrounders bureau; if it is negative, then the tax bureau will refund the enterprise.
Special
Maximum refundable amount calculation
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Maximum Refundable Amount = (Collection Amount From Overseas for the Export Sales
Blogs
- Duty Free Imported Raw Material) × Refund Rate

Assumptions for the example are shown in the following table (in this case, we assume
there is no custom duty applied).

Since the refund rate is different from the levy rate, export-oriented enterprises shall
bear additional tax burdens, which ultimately will affect profit and loss.
Reader's Service
Learning with
'Beijing Review' Export tax rebate and exemption declaration procedures
E-mail us
RSS Feeds Export enterprises must follow up formal registration of tax refund to apply for a VAT
PDF Edition refund or exemption. They should submit the following documentation to the responsible
Web-magazine tax authority for the approval of registration, which should be obtained within 30 days
Reader's Letters from the date of export approval:
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- Declaration form;

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Applying for Export Tax Rebates In China -- Beijing Review Page 2 of 2

Hot Links
- Business license; and
China.org.cn
Xinhua News Agency - Documentation approving their export operation issued by the Ministry of Commerce.
People's Daily
China Daily After a production enterprise carries out export procedures and records the sales in their
China Radio International financial statement—based on the requirements of their accounting system—it can apply
CCTV
to the tax bureau for VAT payment and exemption and deduction, and to the same
CHINAFRICA
bureau for VAT refunds.
Market Avenue
eBeijing
The application period for a tax refund is from the first day to the 15th day of the
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following month. When an enterprise applies for a VAT payment and exemption or
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deduction, the following documentation needs to be provided:
mulberry bags
chanel bags - Declaration of VAT payment form and other required forms such as the declaration
form of VAT exemption, deduction and refund for production enterprise, issued and
approved by the local tax refund authority;

- Export invoice, import and export declaration form, cancellation and verification from
the State Administration of Foreign Exchange, in accordance with the customs
handbook; and

- Other documents as may be required by the tax authority.

For newly incorporated manufacturing companies, accumulated negative VAT payable

for the first 12 months cannot be refunded—this amount will be refunded in the 13th
month in one lump sum. If the company cannot collect money from overseas customers
for export sales, it also cannot obtain a refund on time. If the company cannot complete
the VAT EDR (effective date of registration) filing for export sales within 90 days (for
example, the goods are shipped outside of China and the export declaration form is
obtained in January, but the VAT EDR filing is not completed prior to the end of March),
these export sales must be deemed local sales, and are liable for 17 percent VAT.

The author is the Senior Legal Associate of Dezan Shira & Associates' Beijing Office
(www.dezshira.com)

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