Announcement of the State Administration of Taxation on Adjusting and Improving Relevant Matters concerning Tax Rebate (Exemption) on Exported Goods Handled by Integrated Foreign Trade Service Enterprises

Announcement of the State Administration of Taxation [2017] No.35

September 13, 2017

With a view to promoting the healthy development of integrated foreign trade service enterprises and forming an export rebate (exemption) administration mode suitable for the development of these enterprises, relevant matters on export rebate (exemption) handled by integrated foreign trade service enterprises on behalf of manufacturers are hereby notified as follows, according to the guidelines specified in the Circular of the Ministry of Commerce, the General Administration of Customs, the State Administration of Taxation, the General Administration of Quality Supervision, Inspection and Quarantine and the State Administration of Foreign Exchange on Relevant Work to Promote the Healthy Development of Integrated Foreign Trade Service Enterprises (Shang Mao Han [2017] No.759).

I. Where an integrated foreign trade service enterprise (hereinafter referred to as the "integrated service enterprise") handles export rebate (exemption) matters on behalf of domestic manufacturers and the following requirements are fulfilled as well, the integrated service enterprise may handle export rebate (exemption) matters (hereinafter referred to as the "handle tax rebate on a commission basis") in a centralized manner at the competent tax authority at its locality,
1. It is included under the definition of an "integrated service enterprise" specified by the Ministry of Commerce and other related authorities and is required to file a record at the competent tax authority; and
2. It has in place relatively comprehensive internal risk control rules for handling tax rebate on a commission basis and has been filed under record at the competent tax authority.

II. Where a manufacturer exporting goods satisfies the following requirements as well, an integrated service enterprise is allowed to handle tax rebate for it on a commission basis,
1. Where the exported goods are manufactured or deemed to be manufactured by the manufacturer itself;
2. Where the manufacturer is a value-added tax (VAT) general taxpayer and has been filed under record for export rebate (exemption) as required;
3. Where the manufacturer has inked an export contract with an overseas entity or individual;
4. Where the manufacturer has signed an integrated foreign trade service contract (agreement) with an integrated service enterprise to agree on that the integrated service enterprise should offer integrated services such as declaring goods at the customs, having goods inspected at the customs, logistics services, handling tax rebate on a commission basis, and handling the customs clearing, and to specify relevant legal liability;
5. Where the manufacturer keeps the competent tax authority informed of the deposit bank and the bank account for handling tax rebate on a commission basis (hereinafter referred to as the "account for the commissioned tax rebate").

III. Any manufacturer shall file a record to notify its efforts in having the tax rebate handled on a commission basis. It shall submit the Record-filing Form for Having Tax Rebate Handled on a Commission Basis (See Appendix I) to the competent tax authority at its locality and specify the account for the commissioned tax rebate, and safekeep the integrated foreign trade service contract (agreement) signed with an integrated service enterprise for future reference, after it has filed a record for the tax rebate (exemption) purpose and before it initially entrusts the integrated service enterprise to handle tax rebate on a commission basis.
Where there is any change to information in the Record-filing Form for Having Tax Rebate Handled on a Commission Basis, the manufacturer shall resubmit the Form within 30 days from the date when such change arises.
Where the manufacturer plans to handle matters to withdraw the record filed for commissioned tax rebate, it shall not handle such withdrawal until the competent tax authority with jurisdiction over the integrated service enterprise has, pursuant to relevant provisions, returned the tax refundable handled by the integrated service enterprise on a commission basis.
Where the manufacturer plans to handle matters to withdraw the record filed for the export rebate (exemption), it shall handle matters to withdraw the record filed for commissioned tax rebate first pursuant to relevant provisions.

IV. An integrated service enterprise shall file a record for the commissioned tax rebate. It shall submit the Record-filing Form for Having Tax Rebate Handled on a Commission Basis to the competent tax authority at its locality, and safekeep the following materials for future reference, after it has completed the record-filing for export rebate (exemption) and before it handles tax rebate on behalf of each manufacturer for the first time,
1. The integrated foreign trade service contract (agreement) signed with the manufacturer;
2. The Record-filing Form for Having Tax Rebate Handled on a Commission Basis for each manufacturer which entrusts it to handle tax rebate; and
3. Information about efforts of the integrated service enterprise to develop and apply the internal risk control information system for handling tax rebate on a commission basis.
Where there is any change to information in the Record-filing Form for Having Tax Rebate Handled on a Commission Basis, the integrated service enterprise shall resubmit the Form within 30 days from the date when such change arises.
When the integrated service enterprise is filing a record for the commissioned tax rebate for the first time, it shall submit its internal risk control rules designed for the commissioned tax rebate on a one-time basis to the competent tax authority.

V. The competent tax authority with jurisdiction over an integrated service enterprise shall compare the Record-filing Form for Having Tax Rebate Handled on a Commission Basis submitted by the integrated service enterprise with that provided by the corresponding manufacturer, and process the record-filing for commissioned tax rebate if there is no difference; however, if the comparison finds any inconsistency, the tax authority shall inform the integrated service enterprise of all inconsistent details at one time.

VI. As to exported goods involved in tax rebate entrusted by a manufacturer, it shall calculate the output VAT for these exported goods based on their FOB price and the applicable VAT tax rate, and declare and pay the VAT payable in accordance with relevant provisions; meanwhile, it shall issue to the integrated service enterprise the VAT special invoice, with its Note item marked with words "used for commissioned tax rebate only" (hereinafter referred to as the "special invoice for commissioned tax rebate"), as the certificate for the integrated service enterprise while handling tax rebate on a commission basis.
Where the FOB price of exported goods is measured in a type of currency other than Renminbi, the rate of conversion into Renminbi may be Renminbi central parity rate on the exact date when the sales volume is incurred or on the first date of the month when the sales volume is incurred.
The "Amount of Money" item on the special invoice for commissioned tax rebate must be filled in with a figure exchanged into Renminbi for the FOB price of exported goods.

VII. When an integrated service enterprise handles tax rebate on a commission basis at its competent tax authority, the tax refundable shall be calculated based on the "Amount of Money" specified on the special invoice for commissioned tax rebate and the export tax refund rate applicable to exported goods.
Tax refundable = "Amount of Money" specified on the special invoice for commissioned tax rebate x the export tax refund rate applicable to exported goods
The special invoice for commissioned tax rebate shall not be used by integrated service enterprises as the certificate for VAT deduction.

VIII. An integrated service enterprise shall apply separately to the competent tax authority for handling tax rebate on a commission basis, by reference to applicable provisions on the application for export tax rebate by foreign trade enterprises, by providing the Application Form for Integrated Foreign Trade Enterprises to Handle Tax Rebate on a Commission Basis (See Appendix II), special invoices for commissioned tax rebate (the sheet for deduction) and other application materials.

IX. Any integrated service enterprise shall fulfill responsibilities for the internal risk control over commissioned tax rebate, and strictly examine the business conditions, capacity and realness of export business of manufacturers that entrust them to handle tax rebate on a commission basis. Responsibilities for the internal risk control over commissioned tax rebate are as follows,
1. Designing the internal risk control system for commissioned tax rebate, including risk control processes, rules, management system, etc.
2. Developing the risk control information system for commissioned tax rebate to analyze business conditions and capacity of manufacturers and identify and analyze risks before, amid and after the occurrence of export business, for which the tax rebate is commissioned.
3. Launching an on-spot survey to check on items about business conditions and capacity of each manufacturer for which the amount of commissioned tax rebate exceeds CNY 1 million within a single year, including contracts or orders for exported goods, manufacturing equipment, business premises, their staff members, account books, capacity, etc., and making complete records of and keeping relevant materials about findings in the survey.
4. Verifying whether the trade of exporting goods by each manufacturer for which the amount of commissioned tax rebate exceeds CNY 1 million within a single year is real. Items to be verified include whether the exportation of goods took place indeed, whether goods exported are consistent with those indicated on the customs declaration form, whether the exportation matches with the manufacturer's production capacity, whether there are corresponding vouchers for logistics and export income, etc. For each manufacturer that entrusts the integrated service enterprise to handle tax rebate on its behalf, what is put under verification shall cover 75 percent of its business linked to the commissioned tax rebate, and the integrated service enterprise shall make complete records of and keep relevant materials about findings in the verification.
SAT offices in all provinces (autonomous regions and municipalities directly under the Central Government) may, depending on their own actualities, require integrated service enterprises to fulfill other internal risk control duties for the commissioned tax rebate, and adjust the amount of commissioned tax rebate for manufacturers that need to undergo on-spot survey and the extent of the manufacturer's business to be verified, as mentioned in Item 3 and Item 4 in this article.

X. For detailed records generated by any integrated service enterprise from its fulfillment of duties under Article 9 of this Announcement, contracts (agreements) and vouchers for every single export business with the tax rebate handled on a commission basis, and other relevant materials, it shall have certain materials well bound, stored, safekept and maintained for future reference.
With regard to export business with the tax rebate handled on a commission basis, the integrated service enterprise shall file a record for documents by reference to provisions on the record-filing of documents for self-operated export business of foreign trade enterprises.

XI. The competent tax authority of an integrated service enterprise shall examine and process the application filed by it for tax rebate on others' behalf according to the administration category of export enterprises applicable to the said integrated service enterprise.

XII. The competent tax authority of an integrated service enterprise shall refund the amount of commissioned tax rebate approved to the account designed by the manufacturer concerned for the commissioned tax rebate, and keep the integrated service enterprise informed of details on the tax amount refunded to each manufacturer after the commissioned tax rebate has been concluded.

XIII. Competent authorities of manufacturers shall reinforce risk management over manufacturers by reference to applicable rules on risk management of export rebate (exemption) for goods suppliers. They shall carry out targeted activities to evaluate and examine any unusual situation arising to any manufacturer.

XIV. Where the export business, for which tax rebate is handled on a commission basis, is found unusual, or falls under any of the following circumstances in which tax rebate is temporarily not processed according to relevant provisions, the competent tax authority of an integrated service enterprise shall respond to these circumstances according to the following rules,
1. where tax rebate has not yet been processed, the application for tax rebate for the export business in question shall not be processed temporarily;
2. where tax rebate has been processed, the amount of commissioned tax rebate as approved shall not be refunded temporarily to the extent of the tax refund amount in question.
3. until questionable points have been eliminated, the competent tax authority shall proceed to process the application for commissioned tax rebate in accordance with conclusions drawn for the eliminated doubtful points.

XV. Where the export business, for which tax rebate is handled on a commission basis, falls under a circumstance in which the tax amount refunded shall be taken back under relevant provisions, the competent tax authority of the concerned manufacturer shall pursue the tax amount from such manufacturer. The competent tax authority of the integrated service enterprise shall, in accordance with the notice from the competent tax authority of such manufacturer, temporarily withhold the refundable tax amount approved to the extent of the concerned tax rebate amount.

XVI. Where the export business, for which tax rebate is handled on a commission basis, falls under a circumstance in which the tax amount refunded shall be taken back under relevant provisions, but the integrated service enterprise entrusted fails to fulfill its duties under Article 9 herein and the manufacturer concerned fails to return the tax amount in question to the treasury as required either, the integrated service enterprise shall be held jointly liable and be required to pay to the treasury the tax amount in question that has not been returned by the manufacturer.

XVII. Where an integrated service enterprise falls under any circumstance as follows when it handles tax rebate on others' behalf, its competent tax authority shall adjust its administration category for export enterprises within 20 working days from the discovery of the circumstance,
1. Where the amount of commissioned tax rebate, which is considered as not refundable after examination, accounts for over five percent of the total amount of commissioned tax rebate claimed for consecutive 12 months, its administration category shall be degraded to the immediate lower class.
2. Where the number of manufacturers involved in business subject to commissioned tax rebate, which is considered as not refundable after examination, accounts for over three percent of the total manufacturers associated with the claimed commissioned tax rebate for consecutive 12 months, its administration category shall be degraded to the immediate lower class.
3. Where the amount of commissioned tax rebate, which is considered as an attempt to swindle export tax refund, accounts for over two percent of the claimed total amount of commissioned tax rebate for consecutive 12 months, its administration category shall be adjusted to Class 4.

XVIII. Where an integrated service enterprise is identified as attempting to swindle export tax refund for consecutive 12 months and the amount of commissioned tax rebate concerned accounts for over five percent of the claimed total amount of commissioned tax rebate, it shall be prohibited from handling tax rebate on others' behalf according to provisions stipulated herein within 36 months.
The 36-month prohibition period shall be calculated from the month next to the month when the integrate service enterprise receives the written notice from the competent tax authority. The specific date shall be the export date indicated on the customs declaration form for exported goods.

XIX. In terms of the export business, for which tax rebate is handled on a commission basis, the manufacturer concerned shall bear legal liability as the responsible subject if tax-related violations arise, such as swindling export rebate. Where export rebate is swindled as a result of the integrated service enterprise's practice of illegally providing the bank account, invoices, certifications or other convenience, the integrated service enterprise shall be punished according to Article 93 of the Implementing Rules of the Law of the People's Republic of China on the Administration of Tax Levying.
Where an integrated service enterprise is engaged in the tax-related violations of manufacturers, such as swindling tax rebate, it shall bear corresponding legal liability according to the law, and shall be banned from handling tax rebate on behalf of others according to provisions stipulated herein with 36 months.
The 36-month prohibition period shall be calculated from the month next to the month when the integrate service enterprise receives the administrative penalty decision from the competent tax authority (or the ruling or verdict of judicial organs). The specific date shall be the export date indicated on the customs declaration form for exported goods.

XX. The income obtained by an integrated service enterprise from offering integrated services to manufacturers on their behalf, such as customs declaration, inspection application, logistics services, tax rebate, and settlement, are subject to value-added tax according to applicable provisions.

XXI. Any matters not explained herein shall be subject to existing rules on export rebate (exemption) and value-added tax. SAT offices in all provinces (autonomous regions and municipalities directly under the Central Government) may, based on provisions set out herein, formulate specific operating measures in consideration of local situations.

XXII. This Announcement shall enter into force as of November 1, 2017. The specific date shall be the export date indicated on the customs declaration form for exported goods. Announcement of the State Administration of Taxation on Issues Concerning Tax Rebate (Exemption) of Export of Goods of Foreign Trade Comprehensive Service Enterprises (Announcement of the State Administration of Taxation [2014] No. 13) shall be repealed simultaneously.

Where goods to be exported are declared at the customs after November 1, 2017 but the manufacturer concerned has issued the VAT special invoice (excluding the special invoice for commissioned tax rebate) to the integrated service enterprise before November 1, 2017, the export rebate for these goods shall still be handled according to the Announcement of the State Administration of Taxation [2014] No. 13.

The Announcement is hereby given.