China Export VAT Refunds: How Foreign Companies Can Benefit When Exporting to Their Home Country

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Many foreign companies buy goods in China and ship them to their home country. A frequent question is whether they can recover the Chinese VAT included in the purchase price. The short answer: China refunds VAT on exports, but the refund goes to the Chinese exporter, not to the foreign buyer. This article explains how the system works and how a foreign company can benefit from it.

1. How the export VAT refund works

Exports from China are generally exempt from VAT, and the input VAT paid on the goods can be refunded, fully or partly. The refund is claimed by the enterprise that exports the goods in its own name and that meets the requirements: it must be registered in China, be a general VAT taxpayer, have completed the export refund filing with the tax authority and declare the export to customs.

The refund rate depends on the product’s customs code (HS code). Many products have a rate equal to the VAT rate, for example 13%, while others have lower rates or no refund at all. The rate must be checked for each product before setting prices.

2. Why the foreign buyer does not receive it directly

If a foreign company buys from a Chinese factory and the factory exports the goods, the factory (or its export agent) claims the refund. The foreign company cannot file for the Chinese refund because it is not a Chinese taxpayer. Its benefit is indirect, through the price.

3. How a foreign company can benefit

• Negotiate the export price. When the supplier exports and receives the refund, the price should reflect it. Knowing the refund rate for your product gives you a strong negotiating position.
• Set up your own company in China. A foreign-invested trading company (WFOE) can buy from Chinese suppliers with VAT invoices, export to your home company in its own name and claim the refund itself. This gives more control over the supply chain and the refund, but involves the cost and compliance of a Chinese company.
• Use a foreign trade service company. Some licensed Chinese companies handle export clearance and refunds on behalf of smaller suppliers. This can be practical when the factory has no export capability, but the contractual terms should be reviewed carefully.

4. How the refund is calculated

For a trading company (method known as exemption and refund), the refund is generally calculated on the purchase price excluding VAT shown on the supplier’s special VAT invoice, multiplied by the refund rate. For a manufacturer, a different method (exemption, credit and refund) applies, which offsets the refund against the VAT due on domestic sales.

Example: a trading company buys goods for CNY 100,000 plus 13% VAT (CNY 13,000) and exports them. If the refund rate is 13%, it can recover CNY 13,000. If the rate is 9%, it recovers CNY 9,000, and the difference becomes a cost.

5. Documents and deadlines

• Customs export declaration in the name of the exporter.
• Special VAT invoices from the suppliers, consistent with the goods declared.
• Export contract and, where required, evidence of the foreign currency collection.
• The refund must be filed within the statutory deadline, generally by the VAT filing period of April of the following year.

Mismatches between invoices, customs declarations and payments are the most common reason for delays or rejections, so internal controls matter.

6. Do not forget the destination country

The Chinese refund only concerns Chinese VAT. When the goods arrive in your country, import duties and import VAT apply under local rules, and that VAT is usually recoverable by a registered business there. Both sides should be planned together.

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The views expressed are personal and do not necessarily represent the position of NET CRAMAN. This article is for general information only and does not constitute legal or tax advice. Refund rates and procedures change; seek specific advice before acting.