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07.03.2019

China: New export VAT refunds

A series of measures have been implemented to encourage foreign trade and mitigate the damage caused by the trade conflict

Key Facts
  • MOF and SAT jointly issued a notice which increased the export VAT refund rates of certain products.
  • SAT issued Announcement to improve the classification of businesses and the efficiency of export VAT refunds.
Author
Maggie Han
Senior Manager (Tax/Finance)
China
> View Profile

Background

The trade conflict between China and the United States escalated in 2018, casting a shadow of doubt over the export business. The Chinese government has implemented a series of measures to encourage foreign trade and mitigate the damage caused by the trade conflict.

In the last quarter of 2018, China’s Ministry of Finance (MOF) and the State Administration of Taxation (SAT) jointly issued a notice (Caishui [2018] No. 123) which increased the export VAT refund rates of certain products. Furthermore, the SAT also issued Announcement [2018] No. 48 to improve the classification of businesses and the efficiency of export VAT refunds.

Increase in export VAT refund rate

The product categories and rates affected by Caishui [2018] No. 123 are summarised below:

Products Export VAT refund rate
(before 1 November 2018)
Export VAT refund rate
 (from 1 November 2018)
Photographic paper and film, plastics, bamboo floor coverings, straw woven fabrics, tempered safety glass, lamps, etc. 13% 16%
Lubricants, aircraft tyres, carbon fibre, certain metal products, etc 9% 13%
Certain agricultural products, bricks, tiles, glass fibre, etc. 5% 10%
Soybean meal  13% Export VAT refund has been cancelled.
Other products  15%
9%
5%
16%
10%
6%


The new export VAT refund rates took effect on 1 November 2018. 

Simplified classification procedures and export tax refund process

Announcement [2018] No. 48 contains the following provisions to improve the efficiency of export VAT refunds:

I. Revision of classification procedures for export tax refund applicants

  • Broadens the criteria for categories 1 and 2, allowing more entities to benefit from a fast-track process (i.e. completion of export tax refund formalities within five working days for category 1, ten working days for category 2);
  • Reduces the frequency of category assessment;
  • Reduces assessment timing to 15 working days.

II. E-declaration for export tax refunds

  • Paperless declarations must be made in all areas in categories 1 and 2.

III. Strong support for the development of foreign trade

  • Encourages foreign trade service companies to perform tax refunds on behalf of medium-sized and small enterprises;
  • Provides training to foreign trade service companies on establishing an internal risk control framework.

IV. Provision of export tax refund (exemption) services to enterprises.

WTS observation

  • The export VAT refund rates for many products have been increased. For certain products, businesses can enjoy a full VAT refund of 16%. The increase helps to reduce export costs for Chinese companies and offset certain negative effects of the trade conflict between China and the US.
  • The Chinese government is to curb the exportation of soybean meal by removing the export refund. This is aimed at directing more supply towards the domestic market.
  • Adjustments to the categorisation and implementation of e-declarations may improve the efficiency of refunds. More export companies are expected to benefit from the change, which should mean less auditing and faster refunds.
Article published in WTS Global VAT Newsletter Q1/2019
Recent or expected changes in VAT and GST regulations and compliance duties in various EU and third countries
View publication
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