China: Export tax rebate made easy

The Chinese tax authorities have laid out measures to streamline the process for export tax rebates, which have proved effective in reducing operating costs and easing cash shortages for exporters, following the policies issued in late April 2022 by State Administration for Taxation (SAT) and nine other bodies (in the circular Shui-Zong Huo Lao-Fa [2022] No. 36 and SAT Announcement [2022] No. 9).

The export tax refund process used to be heavily paper-based, requiring cumbersome submissions, especially the proof of foreign exchange income. The policies have now been adjusted as follows:

1. E-application in full force

All export tax rebate tasks can now be processed online, including refund registration, claims or certification. The paper submission remains possible but is no longer mandatory.

2. Digital documentation accepted

For all export rebate claims, applicants are allowed to store all mandatory documents digitally if not in the form of paper dossiers, which can include contracts, invoices, shipping documents, and agent engagement documents. By going digital, applicants can simply maintain a logbook to record the documents’ dates, types, format and locations, to be ready for any tax authority inspection.

3. Forex income proof removed

Perhaps the most heartening amendment is the removal of the need for submitting the proof of foreign exchange income when claiming export tax rebates, except in two circumstances:

• Applications of “class-four-rated” exporters (which are poor performers); or
• Applications submitted beyond the annual deadline, i.e. April of the following year.

4. Faster and extra refunds

Tax rebates have also been made faster and more lenient than before in the following sense:

• Faster refund: The refund lead-time has been shortened to six days, which is one day quicker than before.
• Additional credits: Processing trade manufacturers are allowed to utilise their “irrecoverable input VAT”, which occurs due to the variance between the VAT rate and the refund rate, as an additional credit if the refund rate is raised to the same level as the VAT rate.

5. Leverage of export credit insurance

Export tax rebates will be better aligned with export credit insurance. For example, insurance indemnity paid to exporters, in a failed export deal, can also be accepted as a foreign exchange receipt to support an export tax rebate application. This allows more exporters to qualify for export tax rebates.

All in all, the new measures aim to improve the policies and streamline the procedures for export tax rebates amid the lingering COVID-19 pandemic.

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