Notice on Overseas VAT Refunds Released for Tianjin

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TIANJIN, Apr. 19 – China has issued a circular concerning export value-added tax refunds for vessels transferred overseas under finance leases in Tianjin, effective April 1 and for a pilot run period of one year.

Circular Caishui [2010] No. 24, jointly released on March 30 by the Ministry of Commerce, the State Administration of Taxation and the General Administration of Customs, dictates that finance lease enterprises whose business ownerships have been transferred to overseas enterprises can enjoy export tax rebates for one year in Tianjin.

The export of finance leased vessels under VAT exemption and refund refer to the output VAT, which will be exempted for export of finance leased vessels, and the input VAT, which will be refunded for purchasing vessels. Furthermore, the consumption tax can also be refunded for purchasing any consumption taxable items.

There are two methods for tax refund.

  1. For an early purchase, the tax refund will be conducted in accordance with the lease rental fee collection progress as specified in the contract. Should the lease be withdrawn, tax authorities are entitled to take back the tax refund and interest will be imposed based on the current interest rate.
  2. For a late purchase, the tax refund will be conducted all at once after the ownership of the finance leased vessel is transferred. In cases where the lease is withdrawn and the finance leased vessel is returned and re-imported, the government will not impose import tax and VAT.

For exported vessels under finance leases but without title transfer agreements, there will not be export tax exemptions or VAT refunds. Similarly, the government will not impose import tax and VAT on the re-importation of the same vessels.