New Export Tax Rebates, Customs Duty Exemptions for China-Based Trading Companies

Posted by Written by Dorcas Wong Reading Time: 3 minutes

A number of new measures were released this week to support trading companies operating in China.

Beginning Friday, March 20, exporters in China will enjoy increased tax rebates for around 1,464 products. Authorities shall also expedite customs channels for key material and parts for resumption of work and production.

Separately, this week, the Shanghai government announced that imported materials used for epidemic prevention and control imported by the health authorities would be exempted from customs duties.

China’s industrial output saw the sharpest contraction in the first two months of 2020 in over 30 years due to disruptions and closures caused by the COVID-19 outbreak.

The new measures are among the latest released by the Chinese government to provide immediate relief to trading businesses.

The government has opted to reduce tax and duty obligations for companies operating in the trade sector to hopefully lower overall operating cost and reduce stress on cashflow.

Foreign importers and exporters should contact their local professional service advisers in order to find out the full scope of the measures introduced below.

Increased export tax rebates for 1,464 products

Companies in China are required to pay value-added-tax on the goods that are destined for overseas markets. However, once the goods are sold, certain products are eligible for a rebate on the taxes.

According to a notice released by the Ministry of Finance on Tuesday, China will now increase its export tax rebates for 1,464 products.

Of the 1,464 products, 1,084 will now qualify for 13 percent export tax rebate, including:

  • Porcelain sanitary ware;
  • Petrochemicals (such as: ethylene, propylene, and ethylene glycol); and
  • Stainless steel strip and wire.

A further 380 products will be subject to a rebate of 9 percent export tax rebate, including:

  • Imported livestock;
  • Fresh or frozen meat; and
  • Other food products (eggs, nuts, vegetables, fruits).

In a separate announcement, Prime Minister Li Keqiang presiding over an executive meeting of the State Council ordered that all departments and authorities should ensure export tax rebates are made in full without delay for all industries, except for energy intensive resources or polluting products.

To receive an export tax rebate, eligible exporters must provide their business license and export approval documentation to the relevant local authorities, and submit monthly tax declarations.

Businesses should note that the exact filing procedure differ – based on regionindustry, and whether the company is a manufacturing firm or a trading firm.

Key imported items will receive preferential treatment

During the period of COVID-19 prevention and control, some key imported items will also receive temporary preferential treatment.

According to a notice released this week by the Shanghai Commission of Commerce, procurement channels for imported materials used to respond to COVID-19 will be optimized, and customs duties exempted.

This includes preventative and control materials such as: pharmaceuticals, disinfectants, protective and rescue equipment supplies, and rescue equipment.

A list of eligible imported materials and imported entities is to be established and importers that fall within this last category can apply for a refund on their duties – before September 30, 2020.

In addition, imports of key materials, parts, equipment, and other products urgently needed by enterprises to resume their normal work and production will give the expedited ‘green access’ custom clearance. This includes raw materials, components, and machinery.

Support for trading businesses returning to work

Complementing the above, businesses that support foreign trade service industries, such as port affairs and truck transportation, will be prioritized to ensure that supply chains return to normal functioning.

Any enterprise that suffers from difficulties in production and operation due to the impact of the epidemic situation may adopt methods, such as adjusting remuneration, rotating shifts, shortening working hours, and so on to stabilize the work position through consultation with employees.

Foreign trade loans and credit support

Lastly, financial institutions are also encouraged to increase foreign trade loans, fully deliver the policy of loan deferment in both principal and interest and consider further rolling over the loans made to smaller firms deeply affected by the outbreak.

The announcement vows to increase support for the CITIC Insurance Shanghai Branch to strengthen financing cooperation with banks and municipal financing guarantee funds and expand the coverage of policy financing from companies with annual exports of less than US$5 million to US$30 million.

During the epidemic prevention and control period, the financing guarantee rate for new applications for related enterprises’ loans has been reduced to 0.5 percent per year.

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