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Why is supplier declaring a higher sale price to their local government?

Posted: 2012-10-29

Full Question

Some exporter in China may use a higher than actual selling price, with the attempt to have more tax drawback. Some of my vendors are also found out by local customs office during export clearance. They are processing trade factory in nature and buy and sell is governed by contract filed with customs office. My question is what is their intention to make higher selling price?


It sounds like your supplier received a payment for you for X amount and shipped goods to you but then declared a higher sales price to the local government in China in order to get a larger VAT rebate. But that is highly illegal for the supplier. Unless your signature is on the falsified documents, you don’t have legal risk but you have a risky supply chain because if your vendor gets caught, your supply chain may be interrupted.

By the way, if you are looking for more resources about VAT and VAT rebate, you will find a lot of content here: Advice on China taxes and VAT payments and reimbursement

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