Tax Refund Pilot Policy in Effect for Certain Goods Transiting through Shanghai

The Ministry of Finance, the General Administration of Customs and the State Administration of Taxation jointly released the “Notice on the Trial Implementation of the Ports of Departure Tax Refund Policy in Shanghai (caishui[2012] No.14, hereinafter referred to as ‘Notice’)” earlier this year, which came into effect on August 1, 2012. The Notice gives green light to Shanghai to pilot a system of tax refund at certain ports of departure (“tax refund pilot program”).

According to the Notice, the tax refund pilot program will apply to container goods declared at Qingdao (Qianwan Port) and Wuhan (Yangluo Port) (collectively the “ports of departure”) that transit at Shanghai’s Yangshan free trade port zone through waterways to an offshore destination. The container goods should be carried by Shanghai Puhai Shipping Co., Ltd. and Sinotrans Hubei Co.

The Notice further states the enterprises eligible to enjoy the policy are (i) class B or above enterprises under customs administration; and (ii) independent export enterprises free of tax-related violations of laws and regulations.

To enjoy the tax refund policy, export enterprises should undertake Port of Departure Tax Refund Filings with the in charge tax authority in advance. For cleared qualified goods, the ports of departure customs will issue a Export Goods Declaration Forms (For Export Refund) (“Export Refund Certificates”), which should be presented by export enterprises to the in-charge tax authority when undertaking tax refund formalities.

After all the goods listed on the Export Refund Certificate have entered Yangshan, the Transit Verification and Cancellation Procedure should be undertaken with Shanghai customs, while the Customs Closing Verification and Cancellation Procedure should be undertaken with the customs at the ports of departure.

Where the tax refund formality is completed, but the Customs Closing Verification and Cancellation Procedure is not completed within two months of the date they left the ports of departure, it will be deemed that the goods have not been exported. The refunded tax will have to be returned and the enterprise will no longer be able to enjoy the tax refund policy.

Previously, tax refunds could only be obtained after the ships left Yangshan for overseas ports. With the implementation of the pilot program, qualified exporters using the Yangshan port as a transfer hub are eligible for tax refund as soon as the goods leave the ports of departure.

It is anticipated that the tax rebate policy will save enterprises’ time in collecting tax refunds and improve their cash flow, as well as help to improve the transfer volume in Shanghai port and make it internationally competitive.

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