A VAT refund is integral to exporters’ operation in China because it eases their burden of paying for taxes. In return, increased export activities allow China’s economy to achieve global competitiveness. Especially during the current pandemic crisis, China made sure to provide immediate relief to the exporting industry. Thus, the new measure has increased the rates related to export rebates.
See more details on our previous post on Export Enterprises to Benefit from Increased Tax Rebates
Trade and manufacturing companies dominate the export industry. As such, it is important to understand the difference in the VAT refund scheme enjoyed by both sectors. Keep reading to learn more.
What are the current rates for the VAT claims in China?
In April 2019, the Chinese government has implemented major changes to its VAT policies through Announcement 39 . It includes the reduction of VAT refund rates to 9 percent and 13 percent. Furthermore, VAT rates charged on exporters also lowered from 10 percent and 16 percent to 9 percent and 13 percent, accordingly.
Comparison between old and new rates on VAT refund
This year, the State Taxation Administration announced an increase in export tax rebates on 1,464 products amid the impact of the COVID-19 outbreak. From 6 percent and 9 percent, the tax bureau provides a VAT refund increment of 9 percent and 13 percent, respectively.
What VAT is refundable?
Both domestic and foreign export companies in China can apply for a VAT refund for goods exported overseas. They are eligible for a full or a portion of VAT refunds from the government. The VAT payments include import tax paid to customs and tax paid to domestic suppliers. Companies with export revenue may earn VAT credits which are preconditions for getting a refund.
Moreover, the refundable VAT rate depends on the commodity HS code determined by the customs department.
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