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VAT Refund for Overseas Visitors Clarified

The State Administration of Taxation (SAT) issued the Administrative Measures for VAT Refund for Purchases by Overseas Visitors upon Departure (for Trial Implementation) a short while ago, making clear that the policy of VAT refund for purchases by overseas visitors leaving China will be implemented in all parts of the country that meet VAT refund requirements. (Read full text in Chinese.)

According to the overseas visitor VAT refund policy announced in January 2015, overseas visitors are eligible for a rebate of 11% on the VAT paid on goods purchased at designated Tax Free shops at the ports of departure. The just announced trial measures give further clarifications to help facilitate the implementation of this policy.

Designated Tax Free shops must go through record filing formalities, said an official in charge of SAT's Department of Goods and Labour Tax. After record filing with the provincial state taxation bureau, all companies that qualify as a VAT general taxpayer, have a tax payment credit ranking of B or above, agree to install the VAT refund management system, have already installed and are using the new-generation VAT invoice management system and agree to keep separate subsidiary ledgers for VAT refund items may become designated Tax Free shops under the new policy. The tax authorities have the right to terminate the record filing if it is found that these shops no longer measure up to the requirements or have violated the regulations.

The Measures specify that the overseas visitor VAT refund information management system must be used in the processing of such refund applications, with the Refund Application Form for Overseas Visitors as the crucial voucher at every stage. The refund procedures mainly involve four stages:

1. When an overseas visitor buys goods at a designated Tax Free shop, obtain from the retailer the Refund Application Form for Overseas Visitors.

2. The overseas visitor presents the Refund Application Form for Overseas Visitors to Customs at the port of departure. Customs checks and stamps the Form.

3. The overseas visitor files the refund application either through a tax refund agent or tax refund desk set up by the tax authorities inside the restricted area of the port of departure.

4. Tax refund agents that process VAT refund applications of overseas tourists shall compile and submit settlement reports to the tax authorities on a monthly basis. After its appointment as a tax refund agent, the provincial state taxation bureau will sign a two-year service agreement with it. Both the designated Tax Free shops and tax refund agents must have the required signage displayed prominently for easy recognition by overseas visitors.

Content provided by Picture: HKTDC Research
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