Recent Developments to China’s Export VAT Refund Regime

The latest VAT adjustments have caused significant concern for many enterprises operating in China, as well as for companies overseas that source materials and products from China. One of the major concerns stems from the lack of notice given for the latest change which was published June 19, 2007 with an effective date of July 1, 2007. For some foreign investors, the changes have resulted in a significant increase in the cost of procuring and producing goods in China for export. In some cases, these cost increases potentially frustrate the business and economic objectives of moving global sourcing and production activities to China by not allowing ample time for adjustments to their operations to cope with these changes.

There are some planning techniques to mitigate the VAT impact on business sourcing and exporting.

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