While VAT rebates on exports are far from new, many companies manufacturing in China are not yet aware of the intricacies of who or what is eligible for a VAT rebate, and when.
This is especially true for companies who’re outsourcing their manufacturing to a local partner, or buying components or materials from local suppliers.
While not absolute, it can be fairly common that these local partners and suppliers will gain the rebate for themselves, not passing on the saving to you and thereby increasing your costs and that of your customers.
Why Vendors Try to Use VAT to their Advantage
If you don’t know the VAT rebate amount, then you don’t really know your vendor’s true pricing. This can complicate negotiations and vendor comparisons. The vendor may be pocketing the VAT rebate without explaining it, thereby inflating your costs!
Why Local Manufacturing Partners Try to Use VAT to their Advantage
Many Chinese companies lack import-export rights and proper China VAT processing facilities but never disclose this. They are forced to use 3rd party trading companies to handle your export and VAT rebate which inflate the price, complicate the relationship, and leak your proprietary information. This can often happen without your knowledge, with the net result being your costs increasing and your IP being at risk!