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Print articleChina: VAT Refunds for Domestic Equipment
January, 2007 -
The Ministry of Finance and the State Administration of Taxation jointly issued the Notice on Adjustment of the Scope of the Tax Refund Policies for the Purchase of Domestically Manufactured Equipment by Foreign Investment Projects on 10 May 2006. The Notice revises the value-added tax (“VAT”) refund policy for the purchase of domestically manufactured equipment (“domestic equipment”), which is available to certain foreign investment projects.
Domestic equipment
For the purpose of the Notice, the term “domestic equipment” means equipment produced in the People's Republic of China and purchased as fixed assets by an encouraged foreign investment project, including accessories and spare parts purchased together with the equipment in accordance with the purchase contract.
Refund policy
The Notice specifies that projects listed as encouraged in the Catalogue for Guiding Foreign Investment in Industries and those listed in the Catalogue of Priority Industries for Foreign Investment in the Central and Western Regions (“Project Catalogues”) are eligible to claim VAT refunds on the domestic equipment they purchase. No VAT refunds are available, however, for the purchase of Domestic equipment that is listed in the Catalogue of Import Commodities for Domestic Investment Projects Not Eligible for Tax Exemption (“Non-exempt Commodities Catalogue”).
The Project Catalogues and Non-exempt Commodities Catalogue are subject to revision from time to time. The Notice clarifies that the Project Catalogues in effect at the time of approval of a project and the Non-exempt Commodities Catalogue in effect at the time the relevant VAT invoice is issued shall be referred to in order to determine eligibility for the aforementioned VAT refunds.
Eligibility
The Notice specifies that the following forms of foreign investment enterprise ("FIE") may be eligible for the VAT refund policy:
• FIEs with general VAT payer status;
• FIEs engaging in transportation business;
• FIEs engaging in the development of ordinary residential properties; and
• cooperative joint ventures engaging in the exploration for, development and production of offshore oil.
Domestic equipment
For the purpose of the Notice, the term “domestic equipment” means equipment produced in the People's Republic of China and purchased as fixed assets by an encouraged foreign investment project, including accessories and spare parts purchased together with the equipment in accordance with the purchase contract.
Refund policy
The Notice specifies that projects listed as encouraged in the Catalogue for Guiding Foreign Investment in Industries and those listed in the Catalogue of Priority Industries for Foreign Investment in the Central and Western Regions (“Project Catalogues”) are eligible to claim VAT refunds on the domestic equipment they purchase. No VAT refunds are available, however, for the purchase of Domestic equipment that is listed in the Catalogue of Import Commodities for Domestic Investment Projects Not Eligible for Tax Exemption (“Non-exempt Commodities Catalogue”).
The Project Catalogues and Non-exempt Commodities Catalogue are subject to revision from time to time. The Notice clarifies that the Project Catalogues in effect at the time of approval of a project and the Non-exempt Commodities Catalogue in effect at the time the relevant VAT invoice is issued shall be referred to in order to determine eligibility for the aforementioned VAT refunds.
Eligibility
The Notice specifies that the following forms of foreign investment enterprise ("FIE") may be eligible for the VAT refund policy:
• FIEs with general VAT payer status;
• FIEs engaging in transportation business;
• FIEs engaging in the development of ordinary residential properties; and
• cooperative joint ventures engaging in the exploration for, development and production of offshore oil.
