Connect & Solve
Trade Q&A
Does Export of Products Not Qualified for Tax Refund Need to Pay Domestic VAT and Surtaxes?
or complex compliance issues.
clearance and fund security.
I am the head of a small foreign trade company in Shanghai. I recently got an order from Southeast Asia for low-end hardware accessories produced by our own factory. We only did domestic sales before, and this is our first time exporting. The customs broker told me that this product is not in the tax refund catalogue, so we cannot apply for export tax refund.
I am very anxious now. On one hand, I am afraid that underpayment of tax will be checked by the tax bureau, which will affect our company's tax credit rating, and further affect our future loans and bidding. On the other hand, I am worried that overpayment of tax will increase costs. The profit of this order is already very thin, and there will be no profit left if we pay extra tax.
Besides, I also wonder if there are other hidden taxes to pay besides domestic VAT. In addition, if I fail to declare on time, will there be late payment fines or other penalties? Could you please clarify for me clearly: do such non-refundable export products need to pay tax, and what aspects should I pay attention to?
Grace WangYears of service：10Customer Rating：5.0
Senior Foreign Trade ConsultantStart a Chat
First of all，we need to correct a common misunderstanding in the industry: many foreign trade enterprises mistakenly believe that non-refundable export products do not need to pay tax，or declare them as tax-free directly，which will trigger a chain reaction of tax inspection，tax repayment + late payment interest and even fines. In serious cases，it will also affect the enterprise's tax credit rating，leading to restrictions on subsequent export customs clearance and financing.
For the tax treatment of non-refundable products，tax characterization should be carried out first: if the product belongs to the export tax-free category specified by the state，you need to complete tax exemption filing with the competent tax authority before export，no domestic VAT and surtaxes are required，but you need to keep procurement contracts，export customs declarations，bills of lading and other documents for inspection，if it does not belong to the tax-free category，it shall be declared as domestic sales，and you need to pay VAT and surtaxes，and the input tax in the procurement link can be deducted to reduce the actual tax burden.
Exclusive cost-saving tip: For low-margin orders，you can negotiate with suppliers in advance to require them to issue special VAT invoices for input deduction. Meanwhile，you can reasonably plan the export time and match the input invoice certification cycle to minimize the actual tax cost and ensure the profit margin of the order.
Evelyn LiYears of service：3Customer Rating：5.0
Cross-border Compliance SupervisorStart a Chat
From the perspective of customs declaration, the tax obligation of non-refundable products is directly linked to the declaration content on the customs declaration. If an enterprise mistakenly declares a taxable product as a tax-free product on the customs declaration, the customs will trigger an early warning during customs data comparison, resulting in the customs declaration being suspended, goods detained at the port, and generating port storage fees and container detention fees. It may even be transferred by the customs to the tax authority for inspection. In this case, you need to submit the to the customs as soon as possible, supplement the tax characterization documents of the product (such as the tax exemption confirmation letter or tax notice issued by the tax authority), and cooperate with the customs to complete data correction to avoid long-term detention of goods. Meanwhile, it is recommended to confirm the tax attribute of the product with the tax authority before customs declaration, ensure that the trade mode declared on the customs declaration is consistent with the tax requirements, and form a logical closed loop between customs declaration and tax administration.
Lucas LiuYears of service：8Customer Rating：5.0
Senior Operations ConsultantStart a Chat
From the perspective of international tax structure, the tax treatment of non-refundable export products can be optimized in combination with the VAT policy of the destination country. If the destination country supports VAT deferred declaration, enterprises can choose to defer paying import VAT when exporting, and accurately declare and pay tax in the domestic link at the same time.
For products regarded as domestic sales, part of the profits can be retained in low-tax entities through reasonable related party transaction pricing, but it must comply with the requirements of the BEPS Action Plan to avoid being identified as transfer pricing tax avoidance by tax authorities. In addition, if an enterprise conducts both domestic sales and export business, it needs to separately account for the input tax of non-refundable export products and domestic sales products, and cannot mix deductions. Otherwise, it will trigger the risk of input tax transfer-out and increase the actual tax burden.
Daniel XuYears of service：10Customer Rating：5.0
Director of Import & Export OperationsStart a Chat
From the perspective of foreign exchange collection and payment compliance, the tax declaration of non-refundable export products must be consistent with the foreign exchange collection and payment data. If an enterprise fails to pay tax in accordance with regulations, the tax authority will push abnormal data to the foreign exchange regulatory authority, resulting in the enterprise's foreign exchange account being listed as a key supervision object, and affecting subsequent settlement and foreign exchange purchase operations.
In this case, you need to timely submit tax payment certificates, export contracts, customs declarations and other materials to the foreign exchange regulatory authority to prove the compliance of foreign exchange collection and payment. Meanwhile, it is recommended to separately calculate the payment for goods and possible taxes when collecting foreign exchange, ensure that capital flow is consistent with invoice flow, goods flow and contract flow, avoid the suspicion of capital backflow or abnormal foreign exchange collection and payment, and maintain the enterprise's compliance level of foreign exchange collection and payment.
Michael ZhangYears of service：6Customer Rating：5.0
Customs Declaration & Compliance ExpertStart a Chat
From the perspective of tax refund audit, the document management of non-refundable export products should maintain the same standard as tax refundable products. Enterprises need to keep procurement contracts, VAT invoices (if any), export customs declarations, bills of lading, foreign exchange collection vouchers and other documents for at least 5 years, for subsequent inspection by tax authorities.
If an enterprise fails to keep documents as required, or there are inconsistencies in documents, the tax authority will determine it as non-compliance, require tax repayment and additional late payment interest. In addition, it is recommended that enterprises establish a special document file for non-refundable products, store it separately from documents of tax refundable products, which is convenient for daily management and audit inspection. Meanwhile, conduct regular self-review on the tax declaration of non-refundable products, and find and correct declaration errors in time.
Andy GuoYears of service：3Customer Rating：5.0
Supply Chain Management ExpertStart a Chat
From the perspective of legal risk, the tax obligation of non-refundable export products should be clearly agreed in the contract. If the contract signed between the enterprise and the foreign customer does not clearly stipulate the tax bearing method, it may trigger trade disputes, leading to the customer refusing to pay or requesting a price reduction. In this case, you need to timely negotiate a supplementary agreement with the customer, clarify that domestic taxes are borne by our party, or include the tax cost in the quotation when quoting.
In addition, if an enterprise is punished by the tax authority for failing to pay tax in time, it may affect the enterprise's business reputation and lead to the loss of subsequent orders. It is recommended that enterprises complete the tax characterization of the product before signing the export contract, include the tax cost in the quotation calculation, and add a tax adjustment clause in the contract to avoid losses caused by changes in tax policies.
Jason WuYears of service：10Customer Rating：5.0
International Logistics & Supply Chain ManagerStart a Chat
From the perspective of supply chain planning, the tax treatment of non-refundable export products can be combined with supply chain optimization. If an enterprise exports non-refundable products for a long time, it can consider transferring the production link to a tax preferential area, or reduce the tax burden through the "tax-free without invoice" policy of cross-border e-commerce comprehensive pilot zones. In addition, it can optimize the logistics route and choose to conduct export business through the bonded logistics center.
Goods can be stored in the bonded logistics center first and then exported in batches, which can delay the tax payment time and relieve the capital pressure of the enterprise. Meanwhile, it is recommended to establish a cost accounting model for non-refundable products, including all taxes, logistics fees, customs brokerage fees and other costs, accurately calculate the profit margin of the order, and avoid accepting unprofitable or even loss-making orders.