Concept of Export Tax Rebate

 

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.

 

Export tax rebate system is an important part of national revenue. Mainly through the refund of export tax rebate exports to balance domestic taxes already paid the tax burden on domestic products, so that the cost of their products not included into the international market and foreign products to compete under the same conditions, thereby enhancing competitiveness and expand exports foreign exchange.

 

So exactly who qualifies for export tax rebates? There are two important concepts to understand: the "exemption, deduction and refund" method, 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).

 

Goods Scope Applicable to Export Tax Rebate (Exemption) in China

 

1. Goods subject to value added tax and consumption tax, including all the VAT taxable goods (excluding those tax-free agricultural products that directly purchased from the farmers, as well as 11 categories of consumer goods such as tobacco, alcohol, cosmetics, etc. the Export Tax Rebate (Exemption) shall only be carried out on the goods that have already been levied VAT and consumption tax or shall only exempt the assessment paid and the amount liable to tax.

 

2. Goods that are declared at China’s customs for export. The export consists of self-support export and principal-agent exports. One of the major criteria deciding whether or not the goods belong to the categories of tax refund (exemption) is to check whether the goods are declared at China’s custom for export. For domestic sales that are not subject to the export declaration, if not otherwise stipulated, shall not be regarded as export goods and therefore shall not be refunded no matter how the export enterprise make the payment or how they manage their financial matters.

 

3. Goods that must financially go through export sales. Only after this the tax of the goods could be refunded (exempted). That is to say, the principle of the Export tax refund (exemption) applies only to goods for the export trade, other than non-tradable export goods, such as donations of gifts, or domestic personal purchase that comes with the people when leaving the country (except as otherwise specified), samples, exhibits, mailings, etc. as these goods are not subject to the sales procedure they cannot be can not ne refunded (exempted).

 

4. Goods that have been collected and have been written-off. In accordance with existing regulations, the goods that export enterprises shall apply for a refund (exemption) must be goods that received foreign exchange and written off by the foreign exchange administrative departments. The State stipulates that those goods must fall into the above mentioned 4 categories: for manufacturing enterprises (including manufacturing enterprises with the right to operate import and export, enterprises commissioning the foreign trade enterprises to conduct export, and foreign-invested enterprises, same as below), an additional condition must be added when applying for export tax rebate (exemption ), that is, the goods that export enterprises shall apply for a refund (exemption) must be self-produced ones or regarded as self-produced ones.

 

Time to Apply Export Tax Refund

 

It is provided that export enterprise should produce all the required documents and submit application for export refund within 90 days from the date of export declaration. In case that the non-compliance is not rectified before the 15th day in the following month, all the export sales are deemed to be local sales and subject to VAT liability. 4 The export enterprise shall make reclassify the export sale into domestic sale in the books and pay the VAT accordingly.

 

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