17 March 2015
Central Government to Cover All Export Tax Rebates from 2015
China’s State Council recently issued its Circular on Matters Relating to Improving the Export Tax Rebate Burden-sharing Mechanism. From 2015 onwards, the full burden of export tax rebates (including VAT rebates on exports and conversion of business tax into VAT rebates on exports) is taken over by the central government’s coffers. For any outstanding rebates for 2014, local governments remain responsible for their share.
Meanwhile, instead of an incremental refund of consumption tax to the local government, the central government will instead allocate a fixed amount of consumption tax back to the local authorities based on the 2014 level. The Circular says detailed amounts concerning the export tax rebates and consumption tax rebates will be decided by the Ministry of Finance.
The reform and improvement in the export tax rebate burden-sharing mechanism does not change the export tax rebate policy of the government on enterprises. On the basis of ensuring full and timely funding for export tax rebates, the division in revenue between governments at various levels is further regulated, with the aim to solve the problem of disproportionate burdens among regions, maintain a unified national market, and promote the sustained and healthy development of exports and the economy.
Export tax rebate is an international practice, in line with WTO rules. Export tax rebate mechanism includes two aspects: First, the government export tax rebate system design. Second, how to share the export tax rebate funds between different levels of government. Previously, the burden of export tax rebate was shared between the central and local governments at the ratio of 92.5:7.5.
Specifically, the central government’s fiscal department reimbursed the export tax rebates to the enterprises and the local fiscal departments submitted their share to the central fiscal department at year-end. For regions with heavier burden, the central government has provided additional subsidies as appropriate. The central government increased the export tax rebate subsidy to regions with heavier burden in 2014 with the approval from the State Council.