China is refunding tax to subsidiaries of foreign companies

Changes to export tax refund policies in China are already helping foreign business to compete there and on the international market.

The change began in April when Chinese tax authorities issued a new notice supporting export tax refund policies, strengthening the connection between export credit insurance and tax rebates. Insurance pay-outs are treated as payment and will be refunded.

The policy is already working, and law firms (HCR included) have been able to secure rebates for UK companies with subsidiaries in China.

In recent years, China has tried to improve its export tax refund policies, aiming to reduce red tape via online applications and increase the speed of return (currently seven working days). Several specific policies were put in place, including ‘no invoice tax return’ for cross-border e-commerce retailers and centralised tax returns for agents providing foreign trade related services.

What is export tax refund?

Export tax refund is the refund of product tax, value added tax (VAT) and goods and services tax (GST) accrued during the production and distribution of exported products in China. This policy aims to create a level-playing field for goods, no matter their country of origin, and to encourage fair competition on the international market.

Who can claim export tax refund?

In general, businesses who sell to businesses can claim export tax refund. Businesses who sell to consumers can also claim export tax refund if they use overseas warehouse services, international couriers, or certain types of shipments.

To qualify for export tax refund, the goods must be:

• covered by VAT and GST
• exported through customs
• financially regarded as an export sale
• produced, or deemed to be produced, by the manufacturer itself
• paid for.

How to claim export tax refund?

• Register for export enterprises tax refund within 30 days of receiving the approval of your export business and the Certificate of Industrial and Commercial Registration.
• Complete and stamp the corporate seal on the Tax Refund Registration Form for Export Enterprises. Submit the form, export approval documents and the Certificate of Industrial and Commercial Registration to the tax authority.
• If application is approved, the tax authority will issue the Export Tax Refund Registration to the business.

Documents required include custom declaration form, export sale invoice, purchase invoice and receipt of payment.