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The Chinese government has announced significant changes to the export Value Added Tax (VAT) refund rules. Immediate attention may be needed to plan for these changes. The changes could significantly reduce refunds made on many items that are exported out of the People's Republic of China, including:
- certain leather goods
- electronic machinery
- toys
- bicycles
- clothing and accessories such as hats
- shoes
- bags and luggage
- oil paintings
Download the Deloitte Tax Analysis below prepared by our VAT team in China, for a preliminary analysis of the changes. Also in the analysis are some possible planning techniques that may mitigate the adverse effect of the changes in some situations.
Deloitte's U.S. Chinese Services Group has the following additional materials available:
- A detailed spreadsheet produced by the State Administration of Taxation (SAT) of many, if not all, of the specific products covered – more than 2,000 in total – with English translations for approximately half of them
- The original pronouncement from the SAT giving notice of the reduction in VAT export refund rates, translated into English
The changes are effective from July 1, 2007, and it appears that there are very limited grandfathering and transition provisions at this stage. There are a number of planning options that can be considered. However, if your company purchases products from China, you need to consider whether you should register any contracts entered prior to July 1, 2007, with the Chinese authorities. In situations where the purchase contracts do not allow for price adjustments, such contracts may have the previous VAT refund regime applied to them if registered by July 20, 2007.
If you would like to receive copies of the above-mentioned materials (i.e., the SAT spreadsheet and original pronouncement), or would like to further discuss how this may affect your planning possibilities, please do not hesitate to
contact us.