All about Chinese Tax Return

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Introduction

The Chinese government will levy value-added tax and consumption tax on domestic production and circulation links before export. However, the government will refund the taxes and fees according to the Chinese tax return policy after the customs declaration.

The increase of export tax return rate by the Chinese government will help to reduce the operating pressure faced by export enterprises. It plays a positive role in improving the export competitiveness of enterprises.

Moreover, China is gradually relaxing the restrictions on export tax rebates, and there will be more preferential policies for export tax rebates in the future.

If you want to set up a foreign enterprise in China to engage in export trade. It will be a good opportunity.

Who can apply for a Chinese tax return?

Foreign-invested enterprises must meet the following three basic conditions before they can apply for export tax rebate:

The scope of business must be the business of exporting products.

This is the most basic condition for enterprises to apply for export tax rebate registration. If the enterprise applying for tax refund is not engaged in the export product business, it cannot apply for an export tax refund.

It must hold a business license issued by the administrative department of Commerce.

The business license is proof that an enterprise can engage in legal operation and its business behaviour is protected by national laws. It is illegal to engage in business activities without a business license and will be punished by law.

It must be an enterprise with independent economic accounting.

The enterprise must have the status of a legal person and have a complete accounting system. At the same time, it should also have independent preparation of financial revenue and expenditure plan and balance sheet of funds. This enterprise should open an independent account in the bank, which can handle the purchase and sale business and the payment settlement.

If the enterprise cannot meet the above conditions at the same time, it is generally not allowed to apply for tax refund registration of export enterprises.

How much is the Chinese tax return rate?

The history of Chinese tax return

The export Chinese tax return rate indicates the ratio of the amount of tax refundable to the price of the calculated tax rebate.

Since 1998, the Chinese government has increased the proportion of export tax rebates.

In the next few years, the rate increased by stages, batches and products. These measures have resulted in an average Chinese tax return rate of more than 15%.

Among them, the rate of textile and clothing, mechanical and electrical products and high-tech products is as high as 17%. This enables zero tax rates on exports.

Since January 1, 2004, there are mainly five kinds of tax return rates of 17%, 13%, 11%, 8% and 5% for different export goods.

If export enterprises purchase goods with small-scale taxpayers and export tax rebate is allowed, the export tax return rate of 5% shall be implemented.

And the export Chinese tax return rate higher than 5% shall be subject to the 6% Chinese tax return rate.

On November 1, 2008, the government adjusted the export tax return rate to 14% for some textiles, clothing and toys.

Then, the rate for daily use and art ceramics will be increased to 11%.

Also, the export tax return rate of some plastic products will be increased to 9%.

Some furniture export tax return rate will be increased to 11%, 13%.

What’s more, the export tax return rates of AIDS drugs, recombinant human insulin lyophilized powder, collagen, tempered safety glass, tantalum wire for the capacitor, marine anchor chain, sewing machine, fan, CNC machine tool carbide knife, some books, notebooks and other commodities will be increased to 9% and 11% respectively.

Chinese tax return policy nowadays

From March 20, 2020, the export tax return rate of 1084 products such as porcelain sanitary ware will be increased to 13%, and 380 products such as plant growth regulators will be increased to 9%.

Chinese tax return policy has been changing. The State Council has continuously adjusted the export tax rebate policy. To solve the problem of the export tax refund, we should give full play to the regulatory role of export tax rebate on export commodity structure. The tax rate may change in the future. Please refer to the real-time updated tax rate.

How do I apply for a Chinese tax return?

At present, China adopts the methods of “levying tax first and retreating” and “tax exemption, tax deduction and tax refund” for export goods of foreign-funded enterprises. Here is the application process:

Submission of relevant certificates for inspection and collection of registration forms.

After obtaining the approval of relevant departments. And got its business documents and business registration certificate of export products. Then, the enterprise should handle the tax refund registration of export enterprises within 30 days.

Declaration and acceptance of tax refund registration.

After getting the “tax refund registration form of export enterprises”, fill in the registration form and relevant requirements immediately. After affixing the official seal of the enterprise and the seal of relevant personnel. The enterprise shall submit the approval documents of the right to operate export products, the industrial and commercial registration certificate and other supporting materials to the tax authorities. Therefore, the tax authorities have completed the acceptance registration after the examination.

Fill in and issue export tax refund registration certificate.

The tax authorities receive a formal application from the enterprise. After verification and approval according to the specified procedures. Then, the tax authorities will give the enterprise “export tax rebate registration”.

Alteration or cancellation of export tax refund registration.

When the business situation of the enterprise changes or some tax rebate policies changes. Enterprises should change or cancel the tax refund registration according to the actual needs. This step is very important. So, don’t forget it.

After completing the above steps, the tax authorities will refund the corresponding tax to the enterprise according to your application.

After the export tax rebate, your export goods enter the international market at a price excluding tax. In this way, even if foreigners tax us, our exports can compete fairly with foreign goods.

Please follow the legal procedures for tax refund policy. If you have any questions, you can contact the local tax bureau for consultation.

Is there any other tax policy I need to pay attention to other than Chinese tax return?

The answer is yes. And check the details below.

Foreign tax relief

China has corresponding policies on foreign tax reduction and exemption. For example, foreign tax credit (FTC) system, double taxation agreement and so on.

If an individual is in a foreign jurisdiction, the income tax paid through foreign source income can be preferentially deducted from the foreign/regional income tax in China.

VAT preference

Import instruments and equipment directly used for scientific research, scientific experiment and teaching shall be exempted from VAT. The value-added tax shall be exempted for the imported materials and equipment provided by foreign governments and international organizations free of charge. Besides, self-produced goods exported by foreign-invested enterprises on their account or entrusted by foreign trade enterprises. Unless otherwise specified, VAT shall be subject to the administrative measures of exemption, credit and refund.

Consumption tax preference

If the taxable consumer goods produced by foreign-invested enterprises are directly exported. The Chinese government does not levy consumption tax on them.

Business tax preference

The interest income and rental income of tangible movable property obtained by foreign enterprises without the establishment of institutions or places in China. The Chinese government does not levy a business tax.

Foreign enterprises have set up institutions and places in China. However, the interest income obtained or the rental income from renting tangible movable property has no actual connection with the institution or place. The government does not levy a business tax.

Foreign-invested enterprises or foreign enterprises conduct equity transfer. There is no business tax.

Preferential income tax for foreign-funded enterprises.

For productive enterprises with foreign investment, the operation period is more than 10 years.

Then, after being approved by the tax authorities, from the beginning of the profit-making year.

The first year and the second year are exempt from enterprise income tax, and the third year to the fifth year are reduced by half, that is, “two exemption and three half reduction”.

For foreign enterprises, there are no institutions or places in China. However, interest, rent, royalties and other income obtained from China are generally subject to enterprise income tax at a reduced rate of 10%.

Enterprises with foreign investment in specific industries, industries and regions shall be subject to enterprise income tax at a lower tax rate.

If you want to know more about Chinese tax policy, also read China Tax Policy for Foreign Companies – The Common Q&A

Conclusion

In this article, we discussed the following things about the tax rebate of Chinese Enterprises:

  • Enterprises engaged in export trade, with a business license and independent accounting can apply for the export tax rebate.
  • At present, China is using the export tax return rate and some changes in the export tax return rate.
  • The tax bureau needs to fill in the application form for tax refund first. If the registration of export tax refund is changed or needs to be cancelled, it should be applied in time.
  • Tax reduction and exemption, VAT, consumption tax, business tax and foreign investment enterprise income tax incentives should be paid attention to these tax policies.

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