Core conclusions:In many cases, the refund is rejected or requires further investigation. The issue isn’t related to policy regulations, but rather to the documents involved: the special VAT invoice, the export customs declaration form, and the transportation documents (such as bills of lading). There are discrepancies between the descriptions, quantities, and units of measurement listed in these documents. According to current regulations, the documents submitted for export tax refund should be filed and kept for 5 years, within 15 days after the tax declaration. If there are inconsistencies between the documents, it may lead to corrections or even the denial of the refund. Therefore, it’s important to double-check all the documents before submitting a quote.
The calculation method for export tax rebates has been discussed several times (how to find the tax rebate rate, how to distinguish between exemption, credit, and refund scenarios, and which regulatory methods are appropriate for cross-border e-commerce transactions). This article focuses on a more preliminary step: the preparation of the relevant documents. Many cases of incorrect tax rebate calculations occur because the application materials are returned for correction. In fact, most problems arise from the matching of the “three documents” involved in the process.
Which three items? What do they each manage?
- Special VAT invoices:It must be proven that the inputs you have obtained serve as the basis for calculating the refund amount. The name, specifications, and quantity of the goods must match those of the actual exported goods.
- Export goods declaration form:It must be proven that the goods have actually been exported. The product code, name, quantity, and trading method (FOB/CIF) should be in accordance with the regulations established by the customs authorities.
- Transport documents (such as bills of lading):It is necessary to ensure that the transfer of goods rights and the relationship between the shipper, consignee, and the number of items match those stated in the customs declaration form.
The three stages of processing—procurement, customs clearance, and logistics—naturally result in differences in data entries. The purpose of tax refund verification is to ensure that the items being processed are indeed from the same batch, that the quantities match each other, and that the units of measurement are consistent across all stages of processing.
Four of the most common discrepancies and methods for dealing with them
| Discrepancies | typical manifestation | approach |
|---|---|---|
| Name of the caliber | The invoice lists the product name in Chinese: A. However, the customs declaration form lists the product name in English: B. The two entries do not match. | Before issuing the invoices, it is necessary to confirm the classification results with the customs broker. The items listed on the invoices should be based on the classification standards used by the customs authorities. |
| unit of measure | Invoices are calculated per “item”, while customs declarations are measured in “kilograms” or “sets”. | Before customs declaration, all values are calculated in a standardized manner. The unit of invoice quantity must be consistent with that used in the customs declaration form. |
| Shipping entity | The shipper listed on the bill of lading is a foreign trade company, while the entity responsible for customs declarations is a factory. | The agency export agreement clearly specifies the dual billing relationships. All documents are processed under the same entity’s jurisdiction. |
| Quantitative verification | 1000 invoices issued, 980 customs declarations processed, and 1000 bills of lading issued | Please refer to the customs declaration form to identify any discrepancies in the sources of samples and losses. After correcting these issues, submit the declaration again. |
A reminder: The translation of product names isn’t a matter of translating each word individually, but rather a question of classification. For example, for the same product “stainless steel hinges,” if the invoice states “hinges” and the customs declaration lists it as “metal hardware for furniture,” both translations are understandable. It’s better to get a classification opinion from a customs agent before issuing the invoice, rather than having the declaration rejected and then having to make changes to the document later.
Also, pay attention to the situation where one order corresponds to multiple invoices: when a batch of goods is invoiced separately (due to multiple suppliers contributing to the delivery, with payments made in installments), the quantity on each invoice must be consistent with the total quantity stated in the customs declaration form. The relationship between the invoices should be clearly indicated on the supplementary page of the documentary evidence. This way, the review officers won’t have to make guesses.
List of documents to be filed and requirements for retention
According to the current regulations on export tax exemption or refund procedures, export enterprises are required to keep records of all documents related to their export transactions. These documents include: purchase and sales contracts (for foreign trade enterprises, these are purchase contracts; for manufacturing enterprises, they are contracts for purchasing goods that are not self-produced), customs declarations for exported goods, shipping documents, etc. These documents must be filed in a systematic manner within 15 days after the application for export tax exemption or refund, and should be kept for a period of 5 years. The simplified regulations issued by the State Taxation Administration in 2022 further clarify the electronic management of these documents. Electronic documents are treated equally as paper documents, and can be archived by numbering them in the order in which they were submitted. During inspections by tax authorities, the documents filed within the past 5 years must be able to be retrieved completely.
Self-inspection five minutes before reporting time
- First, let’s look at the product name:Please ensure that the names on the invoice, customs declaration form, and contract are consistent (keep a comparison table in both Chinese and English).
- Another calculation of quantities:It is necessary to verify whether the quantities on the third line are accurate, and to find a reasonable explanation for any discrepancies between the amounts recorded.
- Then, for the unit:It is necessary to indicate whether the units can be converted between each other, and whether the conversion rules are stated in the notes of the document.
- Search for the subject:Whether the sender, operating entity, and applicant are part of the same chain of responsibility; whether all necessary documents for the agency export agreement are available.
- Keep a backup:On the day of submission, please scan the three documents and archive them using the “submission batch number + date”. The binding process should be completed within 15 days.
common problems
1. Will the qualification for tax refund be revoked if there are discrepancies in the information for items in the third column?
Generally, candidates will not be directly disqualified. In most cases, only those who need to submit corrections or additional explanations during the initial review will be dealt with more seriously. The real risk lies in the timing: when documents are returned for correction, the time it takes for the tax refund to be processed increases, thereby occupying your cash flow.
2. For the factories that act as agents in export operations, who is responsible for preparing the documents?
The person who submits the tax return is responsible for keeping the necessary documents. If the factory handles all aspects of export operations, it should prepare the necessary documents itself. If the export is handled through a foreign trade company, the foreign trade company will be responsible for submitting the tax return and maintaining the relevant documents. The factory must provide the purchase and sales contracts, as well as any related documentation, in order to assist the foreign trade company in completing these procedures. Regardless of who is responsible for preparing these documents, the retention period is five years.
3. Can electronic invoices and electronic bills of lading be used directly?
Yes. According to current regulations, the filing of documents can be done in electronic form. Electronic invoices, electronic customs forms, and electronic bills of lading have the same validity as their paper counterparts. They can be archived by numbering them in the order in which they were submitted. It’s important to ensure that the storage medium is stable and can be read reliably over time.
For factories that export goods, the amount of tax refund is determined based on the documentation submitted prior to the declaration process. Ensuring that all documents are properly matched is the most cost-effective and effective way to ensure accuracy. It’s important to clarify the product names and quantities before discussing the applicable tax rate.
Qihang Zhilian Foreign Trade Research Institute
