China is called the ‘World Factory’ which basically means that it’s a lucrative destination for exporting goods and doing business. One of the specific benefits for trading WFOE or manufacturing companies in China is the export tax refund policy that encourages new businesses to export to China. Those who are looking to take advantage of the China VAT refund should contact us right away to get the process started and save money while doing business in China.
What’s VAT (Export Tax) Refund?
Export tax refund has got to do with the value added tax, or consumption tax, that is paid by the exported goods and the actual production and circulation of those goods in China. The system of the China VAT refund is especially appealing for exported goods and is become an integral part of the tax revenue of China. The system that has been put in place for tax refund in China is mainly through the return of export goods of domestic tax paid to balance the tax burden of local products. This is done to improve competitiveness of local products that enter the international market from China.
China VAT Rates 2017
In 2017, China went through its tax reforms which resulted to the China VAT refund rate being changed from four tiers to three tiers. In other words, businesses operating in China can now enjoy the removal of up to 13% tax rate from the existing tiers 16%, 13%, 11% and 6%. The whole purpose of the lowering of taxes is to lower taxes for taxpayers. Initial estimates after the VAT reform showed signs of success, with many foreign enterprises looking to invest in China to take advantage of the new China VAT refund. These changes to the China VAT rates not only benefit the enterprises by reducing the 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 have a 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.
- 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
- Payment to the supplier after the bank settlement;
- Obtain VAT particular invoices from suppliers after remittance;
- Goods (commodity inspection) Export Declaration;
- Foreign currency account of import and export company receives payment of foreign exchange;
- Collect documents used in each process of export and make pre-declaration;
- Enterprises can obtain the China VAT refund after the pre-declaration is approved
Document Checklist for VAT Refund
- 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.
- 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.
- Purchase Invoice -The purchase invoice states the suppliers’ name, products ‘name, units of measurement and quantity of the export products.
- Remittance Slip or receipt of the settlement of foreign exchange.
- 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.
- The Verification of export proceeds
- 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.
- Our experts will make sure that all the China VAT refund rules are strictly followed while going through the VAT refund process.
- We will make sure that there is no delay in the foreign exchange settlement, and the account operated by the enterprise and can pay at any time.
- Our China VAT refund services lower startups’ management cost.