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How Should Foreign Trade Enterprises Compliantly Complete Full Set of Account Adjustment When Export Tax Refund Fails?
or complex compliance issues.
clearance and fund security.
I am the finance supervisor of a small and medium-sized foreign trade enterprise in Shanghai specializing in household goods export. Last week, I suddenly received a rejection notice from the tax bureau that all export tax refund applications for three batches of EU orders we declared last month were rejected: two batches were rejected due to mismatch between the commodity code on the customs declaration form and the product name on the VAT invoice, and the other batch was returned due to incomplete uploaded foreign exchange receipt vouchers. I am so anxious that I can hardly eat now. The cost of these three batches of goods accounts for nearly 50% of this month's working capital.
If the tax refund falls through, not only the expected profit will be lost, but also the subsequent procurement capital chain may be broken. I would like to ask, for such unsuccessful tax refund, how should we standardize the account processing? Do we need to adjust separately according to different failure reasons? Will it affect the subsequent tax exemption declaration or be forced to be deemed as domestic sales? What filing materials do we need to supplement after account adjustment?
Victor SunYears of service：5Customer Rating：5.0
Trade Risk Control ManagerStart a Chat
First of all，it is necessary to accurately classify and handle the reasons for unsuccessful tax refund，which is the core premise of account adjustment. For the two abnormal situations you encountered，first trace the loopholes at the source: the mismatch between the customs declaration form and the VAT invoice product name is mostly due to the failure to strictly implement the Four Consistencies requirements during the preliminary document review，the incomplete foreign exchange receipt vouchers are due to the omission in the node connection between the foreign exchange collection process and the tax refund declaration，and the failure to establish an advance collection mechanism.
For rectifiable abnormalities (such as incomplete foreign exchange receipt vouchers)，the Immediate Emergency Countermeasure is to supplement the complete foreign exchange receipt vouchers within the rectification period specified by the tax bureau (usually 15 working days)，resubmit the tax refund application，and temporarily do not adjust the accounts，and process according to the normal tax refund process after the tax refund is approved，if it cannot be rectified (such as product name mismatch and cannot be modified)，it is necessary to adjust in two cases: first，if it meets the tax exemption conditions，transfer the amount originally recorded in "Taxes Payable - VAT Payable (Export Tax Refund)" to "Prime Operating Cost"，and at the same time recognize the original export sales revenue as tax-exempt income，no need to accrue output tax，second，if it needs to be deemed as domestic sales for taxation，accrue output tax，offset the original export sales revenue，transfer the corresponding input tax from "Taxes Payable - VAT Payable (Input Tax Transfer Out)" back to "Taxes Payable - VAT Payable (Input Tax)"，and process according to domestic sales account specifications.
Finally，it is necessary to build a Long-term Risk Control Closed Loop: establish a "three-level review" mechanism for documents to ensure that the product name，specification and quantity of customs declaration forms，invoices，contracts and bills of lading are completely matched，foreign exchange receipt vouchers and customs declaration forms shall be bound and collected in advance，and cross verification shall be completed before the pre-declaration of tax refund，so as to avoid the recurrence of similar problems from the source.
Jason WuYears of service：10Customer Rating：5.0
International Logistics & Supply Chain ManagerStart a Chat
For tax refund failure caused by mismatch between the commodity code on the customs declaration form and the product name on the VAT invoice, if the actual attribute of the commodity is consistent with the product name on the invoice, you can apply for modification of the declaration form according to the Customs Administrative Measures for the Amendment and Cancellation of Customs Declaration Forms. You need to submit the Application Form for Amendment/Cancellation of Import and Export Goods Customs Declaration Form, original customs declaration form, copy of VAT invoice, commodity attribute test report and other materials.
The customs will focus on verifying the compliance of commodity classification during review, and if it meets the requirements, the modification can be completed within 10 working days. The modified customs declaration form can be used as a valid tax refund voucher, no additional account adjustment is required, only the document filing needs to be updated; if there is a substantial difference between the actual attribute of the commodity and the product name on the invoice and the declaration form cannot be modified, the accounts shall be processed according to tax exemption or deemed as domestic sales, and at the same time, the commodity classification process for subsequent customs declaration shall be sorted out to avoid similar valuation disputes.
Michael ZhangYears of service：6Customer Rating：5.0
Customs Declaration & Compliance ExpertStart a Chat
For tax refund failure caused by incomplete foreign exchange receipt vouchers, you need to first confirm the matching between foreign exchange receipt vouchers and logistics documents. If the lack of foreign exchange receipt vouchers is caused by poor connection between the logistics and financial departments, you can submit logistics documents such as bills of lading and manifests to the tax bureau as auxiliary supporting materials, and tax bureaus in some regions recognize logistics documents as proof of foreign exchange collection.
At the same time, it is necessary to optimize the information synchronization mechanism between logistics and finance, and synchronize information such as bill of lading number and arrival time to the financial department within 3 working days after the goods are loaded, so as to facilitate the financial department to collect foreign exchange receipt vouchers in advance; if the foreign exchange collection is delayed due to logistics port detention, buyer's delay and other reasons, you need to submit the Explanation on Export Goods Foreign Exchange Collection, logistics port detention certificate, buyer's payment commitment letter and other materials to the tax bureau to apply for deferred foreign exchange collection. The foreign exchange receipt voucher after deferred collection can still be used for tax refund declaration, and no account adjustment is required.
Lucas LiuYears of service：8Customer Rating：5.0
Senior Operations ConsultantStart a Chat
For the situation that unsuccessful tax refund needs to be deemed as domestic sales for taxation, reasonable tax planning can be adopted to reduce the tax burden. If the enterprise involves cross-border related party transactions, it is necessary to ensure that the pricing of related party transactions conforms to the arm's length principle, so as to avoid the tax bureau adjusting the taxable income due to unreasonable pricing.
At the same time, if the exported goods have paid VAT in the importing country, you can apply for foreign tax credit according to the bilateral tax agreement, and the credit part does not need to pay VAT repeatedly in China; if the enterprise meets the conditions for VAT deferred declaration, you can apply for deferring the payment of VAT deemed as domestic sales to the next declaration period to ease the capital pressure. In addition, it is necessary to sort out the tax structure of export business, and adopt different trade modes for goods of different destinations. For example, the FBA warehouse pre-positioning mode can be adopted for the EU region to enjoy the local VAT deferral policy and reduce the tax risk of tax refund failure.
Evelyn LiYears of service：3Customer Rating：5.0
Cross-border Compliance SupervisorStart a Chat
For tax refund failure caused by incomplete foreign exchange receipt vouchers, it is necessary to ensure that the foreign exchange receipt vouchers meet the compliance requirements for cross-border foreign exchange receipt and payment. The foreign exchange receipt vouchers shall include SWIFT message, bank slip and foreign exchange collection description, among which the SWIFT message shall clearly indicate key information such as export contract number and customs declaration number.
If the SWIFT message information is incomplete, you can apply to the bank for supplementary message annotation. At the same time, it is necessary to optimize the foreign exchange settlement and account reconciliation process, and correspond the foreign exchange collection funds to export orders one by one, so as to avoid the difficulty of voucher collection caused by the mixing of multiple foreign exchange receipts; if the foreign exchange is collected by a third party, you need to submit the transaction details of the third-party payment platform and the entrusted payment agreement with the buyer to ensure the compliance of foreign exchange receipt and payment. After being recognized by the tax bureau, it can be used as a valid voucher for tax refund. After account adjustment, the supplementary foreign exchange receipt and payment materials shall be stored in the document filing file.
Kevin LinYears of service：4Customer Rating：5.0
Trade Solutions ManagerStart a Chat
For tax refund failure caused by mismatch between the product name on the customs declaration form and the invoice, it is necessary to sort out the terms of the international trade contract. If the product name mismatch is caused by the incorrect VAT invoice provided by the supplier, you can claim compensation from the supplier according to the "document consistency" clause in the contract, requiring the supplier to reissue the correct VAT invoice and bear the losses caused by the tax refund failure; if the product name mismatch is caused by customs declaration error, you need to check the agreement on customs declaration responsibility in the contract.
If the customs declaration is handled by the freight forwarder, you can require it to bear the corresponding compensation liability according to the freight forwarder service contract. At the same time, it is necessary to add a "document compliance commitment" clause in subsequent international trade contracts to clarify that suppliers, freight forwarders and other parties shall ensure the consistency of documents, so as to avoid tax refund risks caused by document problems.
Andy GuoYears of service：3Customer Rating：5.0
Supply Chain Management ExpertStart a Chat
For tax refund failure caused by mismatch between the product name on the customs declaration form and the invoice, if the batch of goods has undergone on-site inspection by the customs, you need to retrieve the on-site inspection records and test reports. If the inspection records show that the actual attribute of the goods is consistent with the customs declaration form, and only the invoice product name is wrong, you can submit the inspection records as supporting materials to the tax bureau and apply for re-examination of the tax refund application; if the inspection records show that the actual attribute of the goods is inconsistent with the customs declaration form, you need to submit a professional identification report on commodity classification to the tax bureau, explaining the actual attribute and classification basis of the commodity.
If the identification report recognizes the commodity code on the customs declaration form, the tax bureau may re-approve the tax refund. At the same time, before the export of subsequent goods, you need to apply for pre-classification from the customs in advance, so as to avoid the problem of mismatch between commodity code and product name during on-site inspection, and reduce the risk of tax refund failure from the source.
Daniel XuYears of service：10Customer Rating：5.0
Director of Import & Export OperationsStart a Chat
For account adjustment of unsuccessful tax refund, it is necessary to strictly follow the compliance requirements of export tax refund audit. First of all, it is necessary to ensure that the account adjustment matches the "Four Consistencies" (goods flow, capital flow, invoice flow, contract flow). If it is adjusted to deemed as domestic sales, it is necessary to confirm that the amount of domestic sales income is consistent with the foreign exchange collection amount and contract amount; secondly, the document filing shall be updated simultaneously.
If you re-declare the tax refund after modifying the declaration form, you need to supplement the new customs declaration form, modification notice and other materials to the filing file; if it is adjusted to tax exemption or deemed as domestic sales, you need to store the tax exemption application, deemed domestic sales tax declaration form and other materials in the filing file, and the retention period shall be no less than 10 years. In addition, it is necessary to carry out an internal audit of tax refund documents every quarter, focusing on verifying the consistency of documents and the integrity of foreign exchange receipt vouchers, so as to timely discover and correct potential compliance problems.
Grace WangYears of service：10Customer Rating：5.0
Senior Foreign Trade ConsultantStart a Chat
For the capital pressure caused by unsuccessful tax refund, it is necessary to optimize from the level of supply chain structure. First, establish a supply chain document linkage mechanism, incorporate information such as supplier invoicing, customs declaration, logistics, foreign exchange collection and other links into a unified management platform, realize real-time synchronization and verification of documents, and avoid document mismatch caused by information asymmetry; secondly, optimize the use of trade terms, convert some orders from FOB to CIF, and include the risk of tax refund failure into the scope of cargo transportation insurance through cooperation with insurance companies to reduce losses; in addition, establish a cost actuarial model, incorporate the potential cost of tax refund failure into the quotation system, appropriately increase the quotation when negotiating with buyers to hedge the risk of tax refund failure, and reasonably plan inventory to avoid inventory overstock caused by capital chain rupture.