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China extends exporters’ VAT refunds to boost tech

China has again extended the ability for tech manufacturers to recover input VAT suffered in an effort to support the growth of the sector and exporting.

China has traditionally restricted the rights for exporters to recover any Value Added Tax they have incurred in manufacturing. It has been relaxing this since 2019 for sectors it is looking to promote, particular technology. This latest change, announced by the Ministry of Finance (MOF) and State Taxation Administration (STA) introduces five more related sectors from 1 April 2021.

The change means affected companies may reclaim unused input VAT credits stretching back to June 2019. Previously, the credit would have to rolled over with little chance of it being used since exports are VAT exempt.

The five new sectors are: pharmaceuticals, chemical, railway, vessel, aerospace and other transport equipment, electrical machinery and equipment, and instruments and meters. This adds to the existing sectors: general equipment; special equipment; IT communication equipment etc; pharmaceuticals.

The following conditions must be in place to qualify for the credits

  • The incremental uncredited VAT of the taxpayer is greater than zero.
  • The taxpayer’s creditworthiness rating in terms of taxpaying is Grade A or Garde B.
  • The taxpayer has no record of fraudulent obtaining of uncredited VAT refund or export tax refund or issuance of false special VAT invoices during the 36-month period preceding its application for VAT refund.
  • The taxpayer has not been punished by tax authorities for tax evasion during the 36-month preceding its application for VAT refund.
  • The taxpayer has not enjoyed the “refund upon levy” or “refund after levy” policy from April 1, 2019.

You can check the right VAT calculations on individual or batch transactions with our Advisor and Auditor services.


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