Understanding VAT in China: Today’s perspective on the 2007 changes

Understanding VAT in China Today's perspective on the 2007 changes

Douglas in the USA wrote in with the following question:

“I’m having a little difficulty understanding VAT in China and which products are eligible for VAT rebate. In 2007 there were a lot of products who’s VAT rebate was changed. Is there somewhere where I could find this list to see which VAT rebates at export from China were reduced?”

I can get the list of the 2831 items in Chinese, but I have not found it in English yet. But to help answer your question, here are the key items to keep in mind when looking back at the 2007 VAT rebate change.

1. The big announcement in 2007 was known as “Circular 90” and affected (reduced or eliminated VAT rebate) on 2,831 types of items in the following areas:

  • Garment and textile articles
  • Electrical and mechanic appliances
  • Construction materials
  • Base metals, minerals and their products
  • Chemical products
  • Animal and vegetable products

2. The items above were considered “un desirable” by Beijing because they were high-energy consuming or had pollution issues. Also the very low tech industries got squeezed as China hoped to use the VAT restructure to encourage businesses to move up the value chain.

3. Soon after Circular 90 went into effect, the Global Financial Crisis hit and in order to stimulate exports in a slow global economy, Beijing backtracked on some of the 2007 adjustments made to the VAT rebate system.

4. In 2010, there was another round of changes but not as sweeping as 2007.

5. So if you desire to know “what is the VAT rebate rate on a given HS code at present”, you can’t assume that the 2007 rate is still in place today. If you have some specific HS codes, I would be happy to look them up for you.

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