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Is there a VAT tax on direct exports from China?

Global SourcesUpdated on 2024/05/21

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Full Question My understanding is that on direct exports from mainland China there is no VAT tax that the foreign buyer needs to pay the PRC government. Is that true?

Answer

  1. Unless the foreign buyer has an office in China and is the exporter of record out of China, the overseas buyer is not expected to pay any VAT to the PRC government. Let's say you are buying tennis rackets (I was watching Wimbledon last night) and the parties involved are the manufacturer, an exporter and you the buyer. The manufacturer is responsible for paying the VAT as they are "adding value" when making the tennis rackets. The exporter who ships the product out of China (assuming they are following the law) would get a VAT rebate. The VAT paid in and rebate out is all sorted before the goods are in the buyer's hands.
  2. Sounds simple right? But in practice, the exporter may work with the manufacturer to pull a fast one on the foreign buyer by exploiting the buyer's lack of knowledge of the VAT process. It is not uncommon for the exporter to tell the foreign buyer that in addition to the unit price there is a VAT tax and/or an import-export fee. Those items should be included in an "FOB port" unit price already, so if the seller tries to break them out separately, in addition to the FOB price, then it is probably a tactic to get more money out of your pocket.

I hope this helps clear things up for you.

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