Export rebates (exemption), referred to as the export tax rebate, its basic meaning is the refund of export products, domestic production and circulation in the actual payment of the product tax, value added tax, business tax and special consumption tax.
Introduction to Export Tax Rebates
As the world financial crisis has taken hold, China's Central Government moved to increase the value-added tax (VAT) refund rates on several industries in an effort to boost production. For example, China has increased the tax rebate on textiles at least four times over the past six months, most recently increasing the rate to 15 percent from 14 percent in February. In October of last year, the Ministry of Finance raised export tax rebates on 2,486 different types of products, an estimated one quarter of all exports listed by Chinese customs authorities.
Definition of Exemption, Deduction and Refund
So exactly who qualifies for export tax rebates? There are two important concepts to understand: the "exemption, deduction and refund" and the "maximum refundable amount."
The exemption, deduction and refund method and formula are generally applicable only 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 other import and export enterprises for export.
Exemption, deduction and refund are defined as:
1) Exemption: Goods which are exported by production enterprises either directly or on consignment through foreign trade companies are exempted from output VAT.
2) Deduction: This applies to enterprises whose self-produced goods are both exported (directly or through export agents) and sold domestically. The input VAT credit on materials purchased for the production of export goods is offset against the output VAT on domestic sales.
3) Refund: This applies if there is excess input VAT above that amount retained for credit (to be carried forward).
Export tax rebate and exemption declaration procedures
Export enterprises must follow up formal registration of tax refund to apply for a VAT refund or exemption. They should submit the following documentation to the responsible tax authority for the approval of registration, which should be obtained within 30 days from the date of export approval:
- Declaration form;
- Business license;
- Documentation approving their export operation issued by the Ministry of Commerce.
After a production enterprise carries out export procedures and records the sales in their financial statement—based on the requirements of their accounting system—it can apply to the tax bureau for VAT payment and exemption and deduction, and to the same bureau for VAT refunds.
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