China, known as "the world factory," is a lucrative spot for exporting business. One of the specific benefits for a Trading WFOE/JV or Manufacturing Company in China is export tax refunding. On the one hand, the establishment can bring considerable tax refunds back to the enterprise to improve competitiveness even ease financial pressure; On the other hand, it also helps the enterprise to keep an excellent corporate reputation.
What’s VAT (Export Tax) Refund?
Export tax refund refers to the value-added tax and consumption tax paid by the exported goods to the actual production and circulation segment in China. The system of tax refund for export goods is an integral part of the tax revenue of a country. The export tax rebate is mainly through the return of export goods of domestic tax paid to balance the tax burden of local products, making their products to exclude tax costs from entering the international market to enhance competitiveness.
China VAT Rates 2017
China VAT rate has been changed from four tiers to three tiers in 2017, in other words, 13% tax rate remove from the tax rate of 17%, 13%, 11% and 6%.
The most immediate effect of the simplified reform on China VAT Rates is to lower taxes for taxpayers. Preliminary estimates show that the change will benefit 25,000 taxpayers in Guangzhou mainly in the wholesale and retail business field.
The changes in China VAT Rates not only benefits the enterprises by reducing tax burden but also efficiently enhance the enterprise's ability to further expand reproduction by liquidizing the cash flow.
China VAT Refund Process
- The applicant must be an enterprise with the right to self-export and self-VAT refund, which refers to enterprises approved by the relevant departments and owns the right to import and export.
- Enterprises mainly refer to the foreign trade companies and manufacturing enterprises, including Foreign-Invested Enterprises(FIEs).
- Enterprises must hold the legal business license, which is the proof that enterprise or organization has the constitutional rights to operate the business in China.
- Enterprises must have an independent accounting with a separate business bank account to handle the purchase and sale of foreign business and payment.
- Export goods enjoy VAT refund. Since 2015, the VAT rebate rate has three categories. It is 17%, 11%, and 6% respectively. The tax refund rate of consumption tax shall implement according to the legal rate of taxation.
- Legal valid VAT special invoice issued by the supplier.
- Foreign currency received which amount consistent with export custom declared.
- Enterprises that do not have the conditions mentioned above shall not apply for the VAT Return.
Service Process of VAT Refund
- Foreign currency account of import and export company receives payment of foreign exchange;
- Payment to the supplier after the bank settlement;
- Obtain VAT particular invoices from suppliers after remittance;
- Goods (commodity inspection) Export Declaration;
- Collect documents used in each process of export and make pre-declaration;
- After the pre-declaration is approved, the tax refund will obtain.
Document Checklist for VAT Refund
1. Customs Declaration Form.
Customs declaration forms shall be filed by the import and export enterprises when the goods are imported or exported to the customs for inspection and verification of the documents.
2. Export Invoice.
Export invoice is the document issued by an export enterprise based on the sales contract signed by the export buyer. It is the primary certificate of foreign purchase, and also the basis for the accounting department of export enterprises to enumerate the sales revenue of export products.
3. Purchase Invoice.
The purchase invoice states the suppliers’ name, products ‘name, units of measurement and quantity of the export products.
4. Remittance Slip or receipt of the settlement of foreign exchange.
5. Products belonging to the production enterprises directly export or entrust the export of homemade products, which shall be settled on CIF basis and should be accompanied by export cargo waybills and export insurance policies.
6. The Verification of Export Proceeds
7. Other materials relating to export rebates.
- Our tax refund team will control the refund process and inform you the updated tax refund information. A minimum of 2 financial personnel’ salaries will be saved.
- There is no delay in foreign exchange settlement, and the account operated by the enterprise and can pay at any time.
- Our VAT Refund services lower startups’ management cost.