IT-Silkroad

[Processing trade tax management]

 Processing&%tradetax##managementㅑㅏ셩캥in China%#

Processing trade tax management can be divided into processing trade with supplied materials exempt from management and tax management of processing trade with imported materials

< Processing trade with supplied materials exempt from management>

■ Definition

Processing trade with supplied materials means that foreign customers are free to supply all or part of the raw materials, parts, components, parts and packing materials (as materials and parts for short) to commissioned processing units in China for processing and assembly and re-exporting finished products to overseas customers back for sales, and processing units in China will receive processing fees according to the trade contract.

According to the regulation, after received "Processing trade with supplied materials tax exemption certificate" issued by tax authorities, the export enterprises can apply to local tax authorities for tax exemption for income tax and consumption tax of processing products.

■ The range of enterprises for "Exemption Certificate" application

Exemption certificate can be applied by export processing trade with supplied materials enterprises (foreign trade enterprises and production enterprises with import and export operation rights). Enterprises already have duty-free identification, have signed contract of foreign processing with supplied materials, and have been registered for manuals in customs.

If processing trade with supplied materials export enterprises entrust processing business to processing enterprises, export enterprises are responsible for applying "Exemption Certificate”.

■ Tax exemption management of processing trade with supplied materials

☉ Required materials and process of "Exemption Certificate" application

After export processing enterprises perform processing contract, within 20 days after the imported first batch of duty-free materials and parts, it must bring the following materials to the third branch of Finance and Tax Bureau for tax exemption application:

ㅇProcessing trade with supplied materials registration manuals approved and issued by customs, both original and copy with official seals (the original for check, copy for keeping);

ㅇThe original"Processing trade business permit" issued by the foreign trade competent authority(in triplicate set and one for keeping);

ㅇCommission processing contract signed by export processing enterprises and foreign customers;

ㅇprocessing contracts signed by export processing enterprises and other processing enterprises (self-production by export processing enterprises are not required);

ㅇImport Customs Clearance certificate of the first batch of imported materials and parts;

ㅇ"Exemption Certificate" application form shallbe filled correctly(export processing enterprises with supplied materials should fillexport processing enterprises and processing enterprises separately and the name of competent tax authorities);

ㅇ"Refund (Exemption) identification of export commodities form";

ㅇOther materials required by tax authorities.

During the process of performance of the contract, if actualexport amount is greater than the contract, processing enterprises shallchange the "Processing trade business permit”

at foreign trade competent authority and make appropriate changes procedures.

☉ Issuing of "Exemption Certificate"

For the application materials and processes without flaws, the tax authorities will issue “Exemption Certificate".

< Write off management of processing trade with supplied materials >

Within 90 days after the expiration of processing manuals, export processing enterprises shall take below materials to Local third branch of Finance and Tax Bureau for processing trade tax write-off application.

ㅇExemption certificate;

ㅇ"Processing tax write-off declaration list" issued by competent tax authorities (for tax authorities keeping).

ㅇProcessing registration manuals issued by the customs (copy with official seal for tax authorities keeping).

ㅇImport and Export Customs Clearance Certificate (export receipt write-off form, a copy with official seal for tax authorities keeping).

ㅇNotice of processing trade bank deposit account or closing of processing trade (original and copy with official seal for tax authorities keeping).

ㅇExport receipt write-off form approval and issued by Foreign Exchange Management Department(special joint for export tax rebate);

ㅇOther materials required by tax authorities

Export processing enterprises give the commission to enterprises for processing should also need to provide the third joint of "Exemption certificate" and "Processing tax write-off declaration list" issued by competent tax authorities.

< Tax management for processing trade with imported materials>

■ Enterprises under the examination

Enterprises which implement tax (exemption, credit, refund) management should bring proof of tax review of its processing trade issued by competent tax authorities to the competent tax rebate authorities for its processing trade with imported materials tax examination, review and issuing.

■ Procedures

After received "Processing trade business permit" issued by foreign economic and trade department, processing enterprises with imported materials should submit “Processing trade business permit"(in triplicate) and 1 set of import and export contract (copy with official seal) to relevant tax authorities. Approved one will be stamped with special export rebate business seal and tax authorities will retain a joint and return two to the processing enterprises.

If the contents of processing trade need changing, the enterprises should bring “Processing trade business permit change certificate” (in triplicate) and 1 set of import and export contract (copy with official seal) to original tax branch for change of processing trade with imported materials procedures. Tax Bureau will process the procedures for changing according to relevant regulations.

■ Materials storage and review for tax refund (exemption)

Competent tax authorities for approval of processing trade with imported materials tax proof should number retained "Processing trade business permit” and other materials into a book for future verification.

According to retained "Processing trade business permit” and other materials, the competent tax authorities review tax refund (exemption) and manage processing with imported materials manuals.

< Processing trade with imported materials exemption certificate management >

■ summary

Foreign trade enterprises sell imported raw materials priced to processing enterprises and in accordance with the amount of sales VAT invoices fill in “Processing with imported materials Exemption Certificate", and apply for approval from competent export tax rebate authority.

After accounting for payable amount of VAT of sales of raw materials, the competent tax department in charge will suspend the collection of tax temporarily. As export enterprises apply for tax rebate, the competent export tax rebate authority will deduce from the above taxes.

Processing enterprises firstly according to "Processing trade manuals" fillin “Processing with imported materials Exemption Certificate" and submit the application after approved and signed by competent export tax rebate authority. Deduce the taxes such as exemption, deduction, and tax rebate disable of export goods at the time according to the difference between levied tax rate and ratio of tax rebate to calculate current amount of tax payable.

■ Processing procedures

☉ Signature, Seal

Export processing enterprises with imported materials should apply for signed and sealed “Processing with imported materials Exemption Certificate" at the competent tax authority before customs processes the application of imported materials exemption.

After received the signed and sealed materials, the enterprises should keep with copies of the following documents

ㅇ"Processing trade business permit” for processing with imported materials

ㅇ"Imported materials and parts record list” for processing with imported materials

Without record procedures, signed and sealed procedures, the competent tax authority shall not issue “Processing with imported materials Exemption Certificate".

☉ Application for issuing

Foreign trade enterprises processing with imported materials for re-export business, if with the use of priced sales approach, should bring the following materials to the competent tax rebate authority to apply for “Foreign trade enterprises processing with imported materials Exemption Certificate".

ㅇCopy of sales of imported raw materials and parts VAT invoices (deduction joint) and tax payment certificate of imported materials and parts collected by customs.

ㅇCopy of "Processing trade manual";

ㅇImport declaration form for imported materials and parts;

ㅇImport contracts;

ㅇOther materials required by competent tax rebate authorities.

☉ Tax declaration

Processing enterprises processing with imported materials for re-export business should possess issued “Enterprises processing with imported materials Exemption Certificate" for current tax declaration procedures.