Chinese VAT refunds for e-commerce exporters

Thu 16th Jan 2014

The Chinese Ministry of Finance has clarified the Chinese VAT refund process for Chinese online retailers selling outside of the country.  The new guidance covers Chinese enterprises selling via their own website or through the website platforms of others (e.g. Amazon).

Currently, Chinese input VAT is levied at 17% along the production chain.  Import VAT is also levied at 17%.  The Chinese VAT reform will bring sweeping changes to the tax system, and is mid-way through a four year overhaul.

The Chinese authorities charged with overseeing the administration of the VAT system, The Ministry of Finance and the State Administration of Taxation, issued a joint statement on 30 December 2013, and the new guidance came into effect on 1 January 2014.

New conditions for Chinese VAT refunds on internet sales

Chinese companies that are selling goods internationally via the internet are normally entitled to an input VAT refund.  To ensure a full refund, the following conditions must be met:

  • The e-retailer must be registered with the tax authorities, and approved as an exporter
  • There are full customs declarations for the exports in line with the Chinese Customs’ requirements
  • The has been a full settlement of payments due by the customer

Chinese retailers who have incurred import VAT on the goods they then resell, and have full authorisation to do so, they must retain full appropriate invoices to support the reclaim of the import VAT.

The Chinese international e-retail sector is worth about US$ 400bn today.  It is forecast to grow to US$ 1 trillion by 2016 according to the Chinese government.