China VAT refunds to bolster exporters hit by new US tariffs
China has announced a further round of tax breaks to aid its exporters. This follows the US proposing new tariffs levying almost $267bn on Chinese imports. With $50 billion of goods already under 25% duties and another $200bn on which Washington is poised to raise tariffs, this would take the total for 2018 to over $500bn. The US’ imports from China last year totaled $506bn, up from $463bn in 2016.
Extended VAT credits add to latest tax aid for Chinese exporters
China’s Ministry of Finance and State Administration of Taxation announced this month new input VAT rebates for exporters of almost 400 export products, including integrated circuits, non-electromagnetic, steel and cultural products. These will become effective from 15 September 2018. Exports do not incur VAT, but manufacturers suffer input VAT on their own costs and raw materials. The rebates represent a credit or refund for this input VAT.
These latest measures to bolster exporters follow other tax subsidies, including:
- Cuts in corporation tax rates worth $7bn in August
- Extension of R&D 75% tax deductibility to all companies in July
- $10bn in tax breaks for small businesses, including doubling tax thresholds in April
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