Overview of Current Export Goods Tax Refund (Exemption)

To meet the needs of establishing a socialist market economy system, China comprehensively reformed its industry and commerce tax system again in January 1994. This reform was the largest in scale, broadest in scope, and most profound in content since the founding of the country. In line with this tax reform, the methods for export tax rebates (exemptions) were further improved and refined. Article 2, Paragraph 3 of the "Interim Regulations of the People's Republic of China on Value-Added Tax" promulgated by State Council Decree [1994] No. 134 clearly stipulates: The tax rate for exported goods by taxpayers is zero. Article 25 further clarifies: Taxpayers exporting goods with a zero tax rate, after going through export customs procedures, can apply to the tax authorities on a monthly basis for a tax rebate on those exported goods using relevant documents such as export customs declarations. Article 11 of the "Interim Regulations of the People's Republic of China on Consumption Tax" promulgated by State Council Decree [1994] No. 135 stipulates: Consumption tax is exempted on taxable consumer goods exported by taxpayers. Due to different tax rate design principles for different taxes, and since VAT involves all stages of production and circulation, it can be rebated (exempted) under the zero-rate principle. Since consumption tax only involves taxation at the production stage, rebates (exemptions) can be applied to the portion directly exported (or purchased for export). The ultimate goal is to achieve zero VAT and consumption tax burden on sales revenue from exported goods. Based on these guiding principles, the State Administration of Taxation successively studied, formulated, and promulgated the "Administrative Measures for Export Tax Rebates (Exemptions)" [Guo Shui Fa (1994) No. 31], the "Administrative Measures for the Electronization of Export Tax Rebates" [Guo Shui Fa (1996) No. 79], the "Notice on Implementing Classified Management of Export Tax Rebates (Exemptions)" [Guo Shui Fa (1998) No. 95], the "Administrative Measures for the Settlement of Export Tax Rebates (Exemptions)" [Guo Shui Fa (1999) No. 6], and several specific provisions. These documents made detailed stipulations on the scope of export tax rebates (exemptions), electronic management of export rebates, tax calculation bases, calculation methods, routine management, and settlement inspections, marking the gradual move of China's export tax rebate (exemption) system onto a legalized and standardized track.

　　Regarding Export Tax Rebate (Exemption) Policies

　　1. The rebate rates for exported goods subject to VAT rebates (exemptions) were adjusted multiple times. When the national tax system was unified in 1994, policies set the VAT levy and rebate rates for exported goods as consistent. Later, due to factors such as the national economic situation, fiscal burden, tax collection and management levels, and preventing fraud in export tax rebates (exemptions), the rebate rates for exported goods were significantly reduced in 1995 and 1996. Subsequently, influenced by the end of the national economic tightening policy and the Asian financial crisis, the rates were widely or partially increased multiple times in 1997, 1998, and 1999, resulting in five tiers of VAT rebate rates by 2000: 17%, 15%, 13%, 6%, and 5%. The rebate rate for exported goods subject to consumption tax rebates (exemptions) is adjusted accordingly when the levy tax rate changes.

　　2. The scope of export tax rebates (exemptions) for goods was adjusted. This mainly includes:

　　(1) Providing rebates for goods exported by domestic enterprises as overseas investments;

　　(2) Restoring rebates for electromechanical products won in international tenders by domestic enterprises using loans from foreign governments or international financial organizations;

　　(3) Providing rebates for equipment, raw materials, and parts shipped abroad for overseas processing and assembly operations with supplied materials;

　　(4) Providing rebates for goods exported under China's government concessional loans and joint venture cooperation project fund schemes;

　　(5) Steel products sold by listed steel enterprises for use in exported goods;

　　(6) Providing rebates for six categories of domestic products sold at duty-free shops in ports managed by China Duty Free Company;

　　(7) Listed domestic equipment purchased by foreign-invested enterprises;

　　(8) Providing rebates for Chinese-made goods purchased by foreign embassies (consulates) in China and their diplomatic representatives (consular officers), and granting equal treatment to representative offices of international organizations in China and their officials for purchasing specific Chinese-made goods;

　　(9) Foreign-invested enterprises established before January 1, 1994, could choose between "first levy, then rebate," "exemption, credit, rebate," or continue implementing the "no levy, no rebate" exemption policy for self-produced goods exported directly or through foreign trade enterprise agents;

　　(10) Implementing the "exemption, credit, rebate" tax method for self-produced goods exported directly (or through agents) by manufacturing enterprises.

　　3. Calculation methods for exported goods were adjusted

　　To make export tax rebate (exemption) calculations more accurate and coordinate with the new accounting system reform of export enterprises and the need for detailed financial department accounting, the calculation method for export tax rebates (exemptions) was adjusted: First, the calculation method was changed from the "weighted average unit price method" to the "single document corresponding method"; second, for a small number of goods with particularly complex specifications that are difficult to finely account for financially in the short term, the regional "weighted average unit price method" could continue to be used for rebate calculation; third, self-operated export production enterprises could choose either the "first levy, then rebate" method or the "exemption, credit, rebate" method for calculating export tax rebates (exemptions).

　　Regarding Export Tax Rebate (Exemption) Management

　　1. Starting in 1995, foreign trade enterprises implemented computerized management of export tax rebates; the second-phase network version launched in 2000 saw all enterprises adopt computerized management for export tax rebates (exemptions), significantly improving the management level and efficiency.

　　2. A letter-inquiry management method was implemented for processing rebates (exemptions) for goods purchased or exported from sensitive regions.

　　3. The annual settlement management methods for export tax rebates (exemptions) were refined and standardized.

　　4. Management of export tax rebates (exemptions) for export enterprises was classified into A, B, C, and D categories.

　　5. The audit management of export tax rebates (exemptions) and the system for exporters' tax representatives to hold certificates and undergo training and assessment were further strengthened and standardized.

　　6. The development of administrative procedures for export tax rebates (exemptions) made their management more standardized, significantly enhancing the capacity for law-based administration.