Circular of the State Administration of Taxation of the People''s Republic of China, on Several Issues of Tax-refund (Exemption) for Export Commodities

State Administration of Taxation of all provinces, autonomous regions, municipalities directly under the Central government and cities specifically designated in the state plan:
Aiming at some problems reflected in tax-refund (exemption) for export in some areas, after discussion, relevant issues are hereby notified as follows:
1. Calculate output VAT or impose VAT on following Commodities exported by export enterprises which are regarded as the Commodities for domestic market, except there are other stipulations.
(1) Commodities that VAT shall not be refunded (exempted) stipulated by the State;
(2) Commodities that an export enterprise fails to make a declaration of tax-refund (exemption) before the set deadline;
(3) Commodities that an export enterprise has make a declaration of tax-refund (exemption), but fails to supplement complete relevant vouchers to the tax authority before the set deadline;
(4) Commodities that an export enterprise does not apply for issuing Agent Certificate for Export of Commodities before the set deadline;
(5) Other purchased commodities exported by an export enterprise except for the products in four classifications regarded as their own produced products.
If a general taxpayer exports above commodities in the form of general trade, the formula of calculating output VAT is:
Output VAT = FOB of Exported Commodities x Foreign Exchange RMB Price Quotation ÷ (1+ Legal VAT Rate) x Legal VAT Rate
If a general taxpayer exports above commodities in the form of re-export trade for processing of imported materials and a small scale taxpayer exports above goods, the formula of calculating payable tax is:
Payable Tax Amount = (FOB of Exported Goods x Foreign Exchange RMB Price Quotation) ÷ (1 + Tax Collection Rate) x Tax Collection Rate
To above commodities that output VAT shall be accrued, if a production enterprise has, according to rules, calculated the amount of tax exemption, credits and refund, tax that shall not be exempted and deducted and has transferred it into the cost, the amount can be transferred from cost into input VAT. If a foreign trade enterprise has, according to rules, calculated the difference between tax collection rate and tax refund rate and transfer it into the cost, the difference between tax collection rate and tax refund rate and the transfer-in amount of payable tax refund may be transferred into input VAT.
If above commodities exported by an export enterprise are chargeable consumer commodities, except there are separate regulations on it, if an export enterprise is a production enterprise, it shall calculate and pay consumer tax according to the provisions of current policies for tax collection. If an export enterprise is a foreign trade enterprise, consumer tax shall not be refunded.
2. To the commodities that an export enterprise calculates and pays VAT and consumer tax according to the provision of Article 1 of this Circular, tax refund shall not be handled. If the tax refund, credit, and exemption have been calculated, the production enterprise shall deduct and readjust the amount of tax refund, credit and exemption in the same month when it declares and pays the tax. If the tax refund for export has already been handled, the foreign trade enterprise shall repay the refunded tax to the tax authority in the same month when it declares and pays the tax.
3. An enterprise and a small-scale import enterprise that just begin its export business and the period for examination and verification of tax refund is 12 months shall, to the commodities exported during this period, calculate monthly separately tax exemption, credit and refundable tax according to the uniform measures on monthly calculation of tax exemption, credit and refund. If the amount of tax exemption and credit is confirmed correct after examination and verification, the tax authority shall readjust it according to current rules. The amount of refundable tax, which is confirmed correct after the examination and verification, shall not be refunded right now. The refundable tax accumulated every month of a small-scale export enterprise may be handled just-for-once in next January. To the refundable tax amount of the enterprise that just begins its export business, if above amount in every month is confirmed correct after the examination and verification, it may be refunded to the enterprise just-for-once in the same month at the expiration of tax refund examination and verification. The measures of only exemption and credit not refund in original examination and verification shall stop being implemented.
4. After an export enterprise export commodities for other enterprises, except there are separate rules, it shall apply for issuing Agent Certificate for Export of Commodities to the tax authority and transfer it in time to the enterprise authorizing the export within 60 days as of the date that the exported commodities are declared at the customs by Customs Clearance Form (specially used for tax refund for export) and Agency Agreement for Export. If the agency export enterprise could not apply for issuing the Agent Certificate for Export of Commodities within 60 days due to lack of evident materials and other special reasons, the agency export enterprise shall submit proper reasons in writing within 60 days. With the approval of the tax authority at the level higher than region and city, 30 days can be extended for applying for issuing agency certificate for export.
If an agency enterprise for export could not make a declaration of export tax refund for export within the time limit and have to declare it later because the agency certificate for export is postponed to be issued, the agency enterprise for export and the competent tax authority shall handle it according to the provision of Article 4 of the Circular of State Administration of Taxation on Relevant Issues About the Enterprises Fail to Declare Tax Refund (Exemption) for Export Commodities (No. 68, 2005).
The agency enterprise for export shall, within 180 days as of the date that the commodities are declared at the customs (according to the export date indicated in the Declaration Form for Exported Commodities (specially used for export tax refund) provide Verification and Cancellation Form for export tax collection to the tax authority issuing the Agent Certificate for Export (long-term tax collection is not included). If the agency enterprise for export fails to provide Verification and Cancellation Form for Export Tax Collection or the Verification and Cancellation Form is confirmed error within the time limit, the tax authority issuing the Agent Certificate for Export shall inform by letter the tax authority in the location where the authorizing enterprise is as soon as it finds it. The tax authority in the location where the authorizing enterprise is shall impose tax on this lot of commodities according to the standard for the commodities for domestic market.
5. The production enterprises engaged in processing business for imported materials shall fill in the Application Form for Registration of Processing of Imported Materials to the competent tax authority within the next application period for VAT payment after obtaining the Registration Handbook for Processing of Imported Materials issued by the customs, and apply for filling in the Declaration Specification of the Production Enterprises for Processing of Imported Materials to the competent tax authority in the same month the materials are imported, and apply for going through verification and cancellation formalities to the competent tax authority within the next application period for VAT payment after obtaining the certificate for verification and cancellation issued by the competent customs. Whoever does not handle it before the set deadline, the tax authority shall handle it after giving punishment according to relevant provisions of Article 62 of the Law of the People''s Republic of China Concerning Administration of Tax Collection.
6. The policy of tax refund (exemption) for export shall be implemented to the equipments and spare parts exported by an enterprise in the form of investment in kind (including the equipments purchased by an enterprise implementing the policy of expanding the range of VAT deduction before the policy is implemented. The policy of single tax refund shall not be implemented and the policy of tax exemption, credit and refund shall be implemented to the equipments and spare parts purchased in the form of investment abroad in kind by the enterprises implementing the policy of expanding the range of VAT deduction after the policy is implemented.
Tax refund and exemption for the purchased equipments and spare parts exported by an enterprise in the form of investment in kind shall be calculated according to the VAT invoice of the purchased equipments and spare parts. To the old equipments for their own use exported by an enterprise in the form of investment in kind, tax refund and exemption shall be calculated according to following formula:
Refundable Tax = The Amount Listed on the VAT Invoice (Tax mount is not included) x Depreciated Value of the Equipment/Original Value of the Equipment x Applicable Rate of Tax Refund
Depreciated Value of the Equipment = Original Value of the Equipment - Withdrawn Depreciation
To the old equipment for its own use exported by an enterprise in the form of investment in kind, withdrawal of depreciation and depreciated value of the equipment shall be calculated according to the depreciable life registered in the competent tax authority stipulated by the provisions of the Regulations of the People''s Republic of China On Enterprises Income Tax. The tax authority shall, after accepting the enterprise''s tax refund declaration for their own used old equipment, fill in Verification Form for Depreciation of Old Equipment (see appendix) and hand it over to the tax authority responsible for the administration of enterprises income tax to handle tax refund after verification without error.
7. To the mechanical and electrical products bid by domestic enterprises or bid by foreign enterprises and then subcontracted to domestic enterprises for supply by making use of the loan of foreign government and international financial organizations in the form of international bidding, if they are subject to the commodities listed in the Catalog of Import Commodities for Which Foreign Investment Projects Are Not Granted Tax Exemption, tax refund (exemption) is not granted. To other mechanical and electrical products, tax refund (exemption) shall be handled according to current relevant rules.
8. An export enterprise shall go through confirmation formalities for tax refund (exemption) for export according to relevant provisions of the Circular of the State Administration of Taxation Concerning Issuing the Measures (Trial) on Administration of Tax Refund (Exemption) of Exported Commodities (No. 51, 2005). To the Commodities exported by the export enterprises before going through the confirmation formalities, if tax refund is declared during the declaration period for export tax refund, tax refund may be approved according to rules. If it exceed the period for declaration of tax refund, the tax authority shall impose tax on them according to the commodities for domestic market.
9. This Circular shall be implemented as of July 1, 2006. The implementation date shall accord with the export date on the Declaration Form for Exported Commodities.
Appendix: Confirmation Form for Depreciation of Old Equipment.
State Administration of Taxation
July 12, 2006