Guo Shui Fa [2006] No. 102

The state bureaus of tax in all provinces, autonomous regions and cities specifically designated in the state plan:

In response to some problems reflected in the process of export refund (exemption), after research, the relevant problems are hereby noticed as follows:

1. The following goods exported by enterprises shall be deemed domestic cargo to calculate or withdraw output tax or impose value-added tax, except otherwise provided.
1. It is expressly prescribed in the national laws that the value-added tax of the cargo shall be refunded (or exempted);
2. The export enterprise fails to declare tax refund (or exemption) for the cargos within the prescribed time limit;
3. The export enterprise fails to make up completely the relevant certificate to the tax authorities within the prescribed time limit, albeit it has declared tax refund (or exemption);
4. The export enterprise fails to declare the issue of Certificate of Agent Export Cargo within the prescribed time limit;
5. Other outsourcing cargos, which shall be deemed original products except the aforesaid 4 kinds of cargos, shall be deemed original products exported by producers.

Formula to calculate output tax of the aforesaid cargos exported by common tax payers by general trade means:

Volume of output tax= FOB of export goods× price of foreign exchange equivalent of RMB÷(1+rate of statutory value-added tax) ×rate of statutory value-added tax

Formula to calculate the volume of tax payable paid by general taxpayer of the aforesaid goods paid by general taxpayer by means of reexportation of processing imported material and paid by small-scale taxpayer shall be:

Tax payable = (FOB of export goods × price of foreign exchange equivalent of RMB) ÷(1+ leviable rate) × leviable rate

Where the output tax of the aforesaid export products needs calculating and withdrawing and the tax exemption calculated by the manufacturer in accordance with prescriptions is not allowed to be exempted and deducted tax volume has been transferred to cost account, the difference between tax leviable rate and refund rate as well as the sum which has been transferred to export refund payable may be transferred to account of input tax.

Where the aforesaid goods exported by enterprises is dutiable consumption goods and the export enterprise is manufacturers, the export enterprise shall, in accordance with the current policy concerning tax imposition, calculate the paid consumption tax, except otherwise stated; where the export enterprise is foreign trade enterprise, it shall not refund consumption tax.

2. Where such export goods of the export enterprise as calculate the paid value-added tax, consumption tax in accordance with Article 1 of the Circular, it may not handle tax refund. Where the tax exemption has been calculated, the manufacturer shall net off and adjust the tax exemption; where the export refund has been handled, the foreign trade enterprise shall, within the month of tax declaration, make a supplementary payment of the refund tax.
3. Where the auditing period of the newly happened export enterprise and small-sized export enterprise is 12 months, the goods exported during the period of checking shall, in accordance with the consolidated method to calculate tax exemption, offset and refund, on monthly basis, calculate the volume of tax exemption and tax payable. The tax authority may, in accordance with the current provision, handle the procedure of warehouse transfer upon accurate volume of tax exemption after exemption. The tax payable after its auditing has proved accurate shall not handle canceling stock temporarily. The monthly accumulated tax payable of the small-scale export enterprise may handle lump –sum tax refund in January of the next year; as for the newly arisen tax payable of the enterprises, the volume of tax payable of the aforesaid months may, after accurate auditing, be refund to the enterprise at a lump-sump. The exemption-yet-not-refund tax imposition measure during the original auditing period shall cease operating.
4. After export enterprise has acted as an agent of other enterprises to export, it shall, within 60days and on strength on goods declaration (for the special purpose of export refund), agent export agreement, apply to the tax authority for issuing Certificate of Agent Export Goods and transfer it to agent export enterprise in time. Where the agent export enterprise fails to issue the Certificate hereof because of such special reasons as incomplete documents, the agent export enterprise shall, within 60days, raise reasonable reasons in written form and, after having been approved by the municipal and the above tax authority, may postponed 30days to apply for the issue of agent export certificate.

Where the export enterprise fails to declare tax refund within the limited period and has to apply for postponement because of the postponed issue of certificate of agent export, the agent export enterprise and the tax authorities in charge of tax refund shall handle it in accordance with Article 6 of the Circular of the State Administration of Taxation on the Relevant Issues regarding Those Export Enterprises that Fail to Declare the Tax Refund (Exemption) of Exported Goods within the Prescribed Term(Guo Shui Fa No. 68).

The agent export enterprise shall, within 180 days as of the declaration of goods (the date of export noted in the export goods declaration (for the special use of export refund)), submit the instrument of collection verification and writing-off of export (except the forward collection) to the tax authorities, which sign the certificate of agent export. The tax authority which signs agent export certificate shall inform the local tax authority where the agent enterprise is located in time, once it has found that the agent export enterprise fails to provide the instrument of collection verification and writing-off of export to the tax authorities hereof and that error exists herein. The local tax authorities of agent enterprises shall impose tax upon the goods in line with the standard of domestic sales.

5. The enterprises engaged in the production of processing imported materials shall handle Registration Declaration of Processing with Imported Material in the month when material is imported and apply for verification and writing-off procedures in the next value-added tax declaration period after having acquired the certificate of verification and writing-off from the tariff authorities. Where the enterprise fails to apply for it, the tax authorities shall handle it after having given punishment to it in accordance with Article 62 of Law of the People's Republic of China Concerning the Administration of Tax Collection.
6. Export refund (exemption) policy shall be implemented upon equipment and parts and components of equity equipment exported by the enterprises (including the equipment purchased by the enterprises who performs the extension of value-added tax before they perform the policy hereof). Where the equipment, parts and components are purchased by such enterprises as perform the extension of value-added tax deduction scope by means of equity investment off bound after the implementation of the extension of value-added tax deduction scope, they shall implement tax exemption, deduction and refund rather than individual tax refund.

Where the outsourcing parts and components are exported by enterprises by means of equity investment, their value-added tax shall be calculated in accordance with the special invoice of value-added tax for the purchased equipments, components and parts; the tax refund (exemption) of the self-use old equipment exported by enterprises by means of equity investment shall be calculated in accordance with the following formula:

Refundable tax volume=sum listed in the special invoice of value-added tax (exclude the tax volume) ×depreciated value of equipment/initial value of equipment× applicable refund rate depreciated value of equipment= initial value of equipment-withdrawn depreciated value

The self-use old equipment exported by the enterprises by means of equity equipment shall, in accordance with the period of depreciation recorded in the tax authority in charge and prescribed in Regulations of the People's Republic of China on Enterprise Income Tax, calculate and withdraw depreciation and calculate the depreciation value of equipment. The tax authority shall, after having received the refund declaration of self-use old equipment, fill Verification Form of Depreciation of Old Equipment (as shown in the appendix) and submit it to the tax authority in charge and handle tax refund after the auditing proves accurate.

7. Where the bid of electromechanical products won by domestic enterprises or won by foreign enterprises and then subcontracted to domestic enterprises are listed in Catalogue of Import Commodities of Foreign. Invested Projects not Exempt from Duties, they shall not enjoy tax exemption; tax refund (exemption) of other electromechanical products shall be handled in accordance with the relevant prescriptions.
8. Export enterprises shall handle export tax refund (exemption) in accordance with the relevant prescription in Circular of the State Administration of Taxation on Printing and Distributing the Measures for the Administration of Tax Refund (Exemption) of Exported Goods (for Trial Implementation)(Guo Shui Fa[2005]NO. 51). Where the exported goods before the handling of confirmation procedures have declared tax refund within the tax refund period, tax refund may be granted; where it goes beyond the time limit of tax refund, tax authorities shall deem it domestic sale products to impose tax.
9. The Circular shall come into force as of July 1, 2006; the execution date shall be subject to the export date in the declaration of exported goods.

Appendix: Verification Form of Depreciation of Old Equipment (omitted)

State Administration of Taxation

July 12, 2006