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China Export VAT Refund

The VAT refund is a benefit granted to taxpayers engaging in export transactions to reduce the overall tax burden when exporting goods.


According to the exporting enterprise and the category of goods (HS code), the exported goods might fall in one of the following categories:

  1. Goods that are eligible for output VAT exemption when exporting, and granting refund of the input VAT incurred at the date of purchase. Most of the exported goods fall into this category.

  2. Goods that are eligible for output VAT exemption, but not granting refund of the input VAT. Goods falling into this category are generally goods for which the exporting enterprise has not paid input VAT at the date of purchase (if the enterprise incurred in input VAT, this is not recoverable. In such case, exporting enterprises could abandon the VAT exemption treatment and consider the export transaction as domestic sales, and offset output VAT with relevant input VAT); and

  3. Goods that are not eligible for output VAT exemption, and not granting refund of the input VAT incurred at the date of purchase. Goods in this category have their export restricted or banned by the authorities, and their export transaction shall be considered as domestic sales, with input VAT incurred by the exporting enterprise creditable against output VAT.

To be eligible for the VAT exemption and refund, the goods shall be exported by qualified “export enterprises”, which have completed their administrative, tax, and foreign trade operator registration and are engaged in the export business. The mechanism of the VAT exemption and refund differs according to the type of activities carried out by the export enterprise:

  • the Exemption, Credit, and Refund (ECR) method applies to export enterprises engaging in manufacturing activities and exporting self-produced goods. According to the Exemption, Credit, and Refund method, the goods exported by the export enterprise are exempted from output VAT. Then the input VAT incurred by the export enterprise is offset with the output VAT arising from domestic sales. Subsequently, the excess of input VAT can be claimed for a full or partial refund. Goods exported by manufacturing enterprises under trading business mode would not be eligible for the refund.