Circular of the State Administration of Taxation Concerning the Issuance of the Operational Procedure of Tax Exemption, Offset or Refund Management Method for the Export Goods of Production Enterprises (For Trial Implementation)

Circular of the State Administration of Taxation Concerning the Issuance of the Operational Procedure of "Tax Exemption, Offset or Refund" Management Method for the Export Goods of Production Enterprises (For Trial Implementation)

Guo Shui Fa [2002] No. 11

February 6, 2002

The national taxation bureaus of all provinces, autonomous regions, municipalities directly under the Central Government, and cities specifically designated in the state plan:

To ensure the correct execution of the tax exemption, offset or refund management methods for production enterprises, the State Administration of Taxation, based on the requirements in the Circular of the Ministry of Finance and the State Administration of Taxation on Further Implementing Tax Exemption, Offset and Refund on Exported Commodities (Cai Shui [2002] No. 7) and on the basis of extensively soliciting opinions from different regions, has prepared Operational Procedures of Tax exemption, offset or refund Management Method for the Export goods of Production Enterprises (For Trial Implementation). The document is now formulated and hereby distributed. Please implement accordingly. Any problems identified during implementation shall be reported to the State Administration of Taxation (the Import & Export Tax Jurisdiction) in a timely fashion.

Attachment: Operational Procedures of Tax exemption, offset or refund Management Method for the Export Goods of Production Enterprises

To concretely strengthen the tax exemption, offset or refund management methods for the export goods of production enterprises, to further clarify the internal functions of tax organs and the responsibilities of both tax organs and enterprises, to accurately and promptly process tax exemption, offset or refund applications and to prevent fraudulent export tax refund, we have prepared the Operational Procedures in accordance with the requirements in the Circular of the Ministry of Finance and the State Administration of Taxation Concerning the Methods for Further Promoting the Implementation of the Tax exemption, offset or refund Policies for Export goods (Cai Shui [2002] No. 7).

I. Tax refund registration of production enterprises
(I) Production enterprises having the power to engage in import and export trade should apply for registration of export tax refund with the competent tax organs within 30 days after having obtained the power according to the requirements in the Circular of the State Administration of Taxation Concerning the Issuance of 'the Tax Refund (Exemption) Management Methods for Export goods' (Guo Shui Fa [1994] No. 031).
Production enterprises without the power to engage in import and export trade should apply for temporary registration of export tax refund with the competent tax organs by producing the Export Agency Agreement before the first case of export business implemented through an agent.
When applying for export tax refund, production enterprises should fill out the Export Enterprise Tax Refund Registration Form (a sample of the form can be found in the second issue of the network edition of the Export Tax Refund Computer Management System) and provide the following materials:
1. Legal Person License or Business License (copy);
2. Taxation Registration Certificate (copy);
3. Import & Export Qualification Certificate of the People's Republic of China (not required for production enterprises without the power to engage in import and export trade);
4. Registration certificate for enterprises doing customs declaration on their own (not required for production enterprises without the power to engage in import and export trade);
5. Application & Review Form or the Annual Review Form for an ordinary taxpayer of value-added tax;
6. Other materials required by the tax organs, such as the Export Agency Agreement, etc.
(II) Before changing the taxation registration form in 2002, the registration of enterprises for export tax refund should be handled according to the methods stated above temporarily. After the tax registration form is changed in 2002, in addition to providing materials needed for the change of the taxation registration form, export enterprises should also provide the above-mentioned materials as required by the tax organs. After the tax registration is changed in 2002, the export tax refund registration of concerned enterprises will all be integrated into the tax registration process for unified management.

II. Calculation of tax exemption, offset or refund for production enterprises
(I) The amount of tax exemption, offset or refund for the export goods of a production enterprise should be calculated based on the FOB price and the tax refund rate of the export goods. FOB price is based on the amount indicated on the export invoice (if the goods are exported through an agent, the export invoice can be the one issued by the consigner or the consignee). If the goods are sold at other price terms, the freight, insurance premium and commission that are allowed to offset income from sales according to the existing accounting regulations should be deducted. If the declared amount is different from the actual delivery, the difference will be adjusted next time when applying for tax refund (or adjusted at the year-end liquidation). If the export invoices cannot truthfully reflect the FOB price, the enterprise must make declaration to the governing tax organs based on the FOB price, and at the same time the governing tax organs has the right to verify the taxable amount according to related regulations, including Law of the People's Republic of China on the Administration of Tax Levying and the Interim Regulations of the People's Republic of China on Value-added Tax.
(II) Calculation of tax exemption, offset or refund
The amount of tax exemption, offset or refund=the FOB price of the export goods ×Foreign exchange quotation of RMB× the tax exemption, offset or refund for the export goods - the derating amount of tax exemption, offset or refund.
The derating amount of tax exemption, offset or refund = tax-free prices of raw and semi-finished materials× tax refund rate of the export goods
Tax-free raw materials include tax-free raw materials purchased from abroad and the tax-free charging processing. Among them, the price of the duty-free imported charging processing is the taxing price.
The taxing price of the duty-free imported charge processing = CIF price consumption tax
(III) Calculation of the refundable tax amount and the exemptible/offsetable tax for the current period
1. If the tax break left at the end of the current period ≤ tax exemption, offset or refund for the current period,
Refundable tax amount for the current period = tax offset left at the end of the current period
Tax exemption/offset for the current period = tax exemption, offset or refund for the current period - tax refund for the current period
2. If the tax offset left at the end of the current period>tax exemption, offset or refund for the current period,
Tax refundable for the current period = tax exemption, offset or refund for the current period
Tax exemption/offset for the current period = 0
The tax offset left at the end of the current period should be determined based on the "tax offset left at the end of the current period" in the "Value-added Tax Declaration Form" for the current period.
(IV) Calculation of the non-exemptible and breakable part in tax exemption offset or refund
The non-exemptible and breakable part in tax exemption, offset or refund = FOB price of the export goods × the foreign exchange quotation of RMB × (taxation rate of the export goods - tax refund rate of the export goods) – offset by the non-exemptible and breakable part in tax exemption, offset or refund
Offset by the non-exemptible and breakable part in tax exemption, offset or refund = price of the raw materials imported duty-free × (taxation rate of the export goods - tax refund rate of the export goods)
(V) For kainogenesis export businesses, the refundable tax amount for the current period will not be calculated for export businesses occurred within 12 months since their first export business, and the amount of tax exemption & offset for the current period equals to the amount of tax exemption, offset or refund; the input taxes that have not been offset will be transferred to the next period for deduction or offset, and starting from the 13th month, the tax exemption, offset or refund calculation formula will be used to calculate the refundable tax amount for the current period.

III.
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