China To Increase VAT Rebate On Textile Exports

by Mary Swire, Tax-News.com, Hong Kong

24 November 2008

The Chinese government has decided to further increase the rate of value-added tax rebates it currently awards exporters in the textile industry as international demand continues to wane.

The call to increase the amount of VAT refunded to exporters of textiles was made in light of the recent decline in international demand for Chinese goods.

VAT is levied on the majority of goods and services in China. However, when goods are exported, the government offers companies a rebate on the VAT incurred throughout the production process. The amount refunded can vary, and usually reflects the government's desire to incentivise certain sectors of the economy.

Up until mid-2007, the government offered most companies a 17% refund rate on exports. Since that time the government has tinkered repeatedly with rebate rates. The most recent change saw the VAT rebate rate for the textile industry increase from 13% to 14% in October of this year. However, this will now revert to 17% as of December 1, marking the third change to VAT rebate rates for the textile industry this year alone.

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