China’s Ultimate Arms Purchase – (Export Tax Refund) How much do you know?

Article - ET Export Tax

In China, Chinese manufacturers have 17% export tax rebate. As the name suggests, when Chinese manufacturers export goods to foreign countries, they can recover up to 17% of the value-added tax from Chinese government. This is China’s policy of encouraging people to export goods. And this policy is actually closely related to us as an importer in Malaysia. However, the importers of small and medium-sized “bulk cargo” in Malaysia are now facing with a problem that their suppliers are generally unable to claim that 17% tax refund from the Chinese government. So, what are the reasons?

In order to understand the reasons for this, we must understand how most Malaysian importers import “bulk”. “Bulk” is defined as a cargo that is less than one container. Generally, goods within 20 cubic feet are collectively referred as bulk cargo. In general, the shipping company of China-Macedon Line will set up a warehouse in a specific location in China. After the importer has finished purchasing the goods, the importer will send directly to the supplier of the shipping company’s warehouse. Then, freight company will put together the goods of other customers into a container, declare it to China in the name of the freight company, and then import it into Malaysia, and then it is import in the name of the freight company, and finally “sell” it to the importers. This process is collectively referred to as “one-stop” import in Malaysia.

In simple terms, if we compare “one-stop” to “bus rides”, then the container is the bus and the cargo above is the passenger. They may just occupy a few seats or cubes and then come to the destination with the bus. However, there is a special passenger in this process, that is, “tax refund goods.” Some of these “tax rebates” cannot catch “one-stop” buses. They can only use the same bus with other “tax refund goods”. In other words, the two cannot be mixed together.

At this time, the problem occurred because the quantity of “tax refunds” was relatively small and the process was too cumbersome, resulting in very few containers. Therefore, importers could not find a suitable mode of transport to bring these goods in. This also led to two situations. In the first case, manufacturers give up the idea of ​​tax rebate, but the tax refund cannot be returned, which means the cast cannot be reduced. Thus, the importer’s cost of goods will increase accordingly. In the second case, the manufacturer did not choose to ship the cargo carrier’s container but chose LCL.

In other words, instead of using public bus, they chose a private taxi. In the case of bulk cargo, the cost of this transportation method is several times that of “one-stop”. As a result, the tax refund is reduced, but the importer must pay high transportation fees.

So what is the solution to this situation?

In fact, there is a third option, which is to find a freight company that has a “refund cabinet”, and the “tax return counter” is like a bus that only picks up special VIPs. This cabinet specializes in tax refunds, allowing manufacturers to claim 17% of their refunds. Export tax rebates can also be imported at low cost. Although this kind of tax refund counter is relatively small, it can still be found. Therefore, after we learned this information and later met the manufacturers who insisted on tax rebates, we knew that we must use the third option to reduce our costs.

If you read this article and it is useful to you, please share it with your friends. “Export tax rebates” series is divided into three parts to explain, please stay tuned for the second and third part, true understanding about “export tax rebate” brings unimaginable changes to your import career

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