Your China-based company may be eligible for a tax rebate and you might not even know it! Taxes are classified into two main categories: direct and indirect taxes.
are known as taxes that are directly levied on an individual or entity—for example, income tax or taxes on assets.
On the other hand, indirect taxes
are levied on services and goods rather than income or profits—for example, VAT or sales tax.
Certain taxes can be avoided by corporations by filing rebates. However, it is easier to file for refunds on indirect taxes like, VAT, than direct taxes. Once you’ve filled the rebate form and provided the required documents, the refundable amount will be returned by the government.
Earlier, the Chinese economy was driven by manufactured goods, but the government is now aiming to divert the focus toward service-oriented economic activities.
In order to facilitate service sector, China’s VAT Reforms underwent a significant change in 2016.
China wants to move away from low-value added products and encourage businesses to venture into high-end manufacturing goods and services.
Which Companies Can Apply for China Tax Refund?
Whether you’re a WFOE, Joint Venture or a Representative Office operating within China, you can easily apply for tax refund. However, the reimbursement of your taxes will depend on the nature of your product and the type of tax paid.
Entitlement to tax refund treatment
In order to be eligible for tax refund, you need to register as a tax-paying entity. Once you’ve received your business license from the government, apply as a tax rebate qualifier with the local tax department.
Various declaration forms and supporting documents like, export license, will be required for completion of this process.
Clearly disclose all your taxable income, assets, and properties, along with tax exemption you’re eligible for.
You need to prove to the government that you’ve paid taxes on service, goods, and exports, which can be reimbursed by the government.
Trading WFOE can qualify for VAT refunds on items exported. Here is a list of VAT refund rates
on different commodities, according to State Administration of Taxation.
In addition to this, some sectors and business types are given preferential refund rates. For example, tax levied on the purchase of new equipment for factory can be fully reimbursed in certain sectors and provinces.
In order to encourage foreign-owned businesses, the government doesn’t collect income tax for the first 2 years. In the following 3 years, half income tax may be levied on the income of foreign companies. If your foreign company belongs to advanced technology sector, your business will avail half income tax for the succeeding 6 years.
Tax refunds can be received within 3–6 months, but for timely recovery, you need to file for these rebates in the beginning of financial year. It’s your job to know, whether your business is eligible for tax rebates or preferential treatment. We can help you with the tax registration and China Company registration process. Email
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