China Clarifies Issues Related to Value-Added Tax and Consumption Tax of Exported Goods and Services

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Nov. 28 – China’s State Administration of Taxation released the “Announcement on Issues concerning Value-Added Tax and Consumption Tax of Exported Goods and Services (Announcement [2013] No. 65, hereinafter referred to as ‘Announcement’)” on November 13, which clarifies issues related to the value-added tax (VAT) and consumption tax of exported goods and services. Detailed information can be found below.

Deregistration of tax refund qualifications
According to the Announcement, if an export enterprise or other entity applying for the deregistration of tax refund (exemption) qualifications declares to the tax authority to waive the undeclared export tax refund (exemption) or to waive the export tax refund (exemption) which has been declared but not yet handled, and applies for tax exemption according to relevant provisions, it shall be deemed as having settled the export tax refund.

Waiver of tax refund
Export enterprises or other entities may waive tax refund (exemption) for all exported goods and labor services to which the tax refund (exemption) policy is applicable, and choose to apply the VAT exemption policies or tax levy policies.

Export enterprises or other entities that waive the applicable tax refund (exemption) policy shall submit the Declaration on Waving Tax Refund (Exemption) of Exported Goods and Labor Services to the competent taxation authority to go through the filing formalities. Within 36 months from the second day of filing, exported goods and labor services to which the tax refund (exemption) policy is applicable shall be subject to VAT exemption policies or tax levy policies.

Determination of planned allocation rate
Where production enterprises engaged in the imported material processing business fail to determine the planned allocation rate of the imported material processing business for the current year, they shall use the most recent actual allocation rate in the customs verified manuals of the previous year as the planned allocation rate of the year.

After handling the annual verification of the imported material processing business, if the production enterprise considers that the actual allocation rate does not reflect the actual situation of the enterprise of the year, they may, after providing the planned allocation rate of imported material processing for the current year and a written statement with justifiable reasons to the competent tax authority, use the estimated allocation rate of imported material processing as the planned allocation rate for the year.

Selling to special zones
For export enterprises entering into the following State-approved special zones and selling goods to entities within such zones or to overseas entities or individuals, and settle the transactions in RMB, they may declare export tax refund (exemption).

  • Export processing zones;
  • Bonded logistics parks;
  • Bonded harbor zones;
  • Integrated bonded zones;
  • Zhuhai-Macau Cross-border Industrial Zone;
  • Sino-Kazakhstan Horgos International Border Cooperation Center; and
  • Bonded logistics centers.

Export of self-produced goods
Where the goods purchased from elsewhere by a production enterprise can be directly combined with its self-produced goods into a set of goods without being processed or assembled by the enterprise, the export of the set of goods to overseas entities or individuals may be subject to tax refund (exemption) policies for self-produced goods.

The Announcement is scheduled to take effect on January 1, 2014.

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