Effective from 1 January 2026, the Administrative Measures for VAT and Consumption Tax Refunds (Exemptions) on Export Transactions (Announcement No. 5 of 2026, “the Announcement”) has taken effect. The Announcement does not change the material rules for the export refund but improve the procedures in various aspects.
We are pleased to present the key highlights of several adjustments in the Announcement that are most relevant to the companies that carry on export businesses in China.
I. Unchanged Foundation: The Current Basic Framework for Tax Refund Remains Unchanged
Before diving into the improvements outlined in the Announcement, we first emphasize an unchanging foundation of stability: the basic eligibility criteria, calculation methods, and primary filing procedures for export tax rebates (or exemptions) do not undergo any fundamental changes. Companies need not worry that their existing export business’ eligibility for tax refund or established filing practices will be overturned.
II. Key Features of the New Announcement: System Optimization from Filing to Amendment to Processing
One of the core objectives of this revision is to enhance the convenience of processing export tax rebates (or exemptions). For manufacturing and export companies, the following five adjustments are particularly noteworthy.
a) Filing Process: One-Form Processing
Previously, five different forms were required. The Announcement consolidates them into a single Export Tax Refund (Exemption) Filing Form, with supporting materials for eight specific entities listed in one List of Supporting Materials — making filing more efficient.
b) Change in Tax Refund (Exemption) Methods: An Exception Clause Eliminating the Requirement to Settle Taxes in Advance Is Added
Previously, before applying to change a tax refund (exemption) method (e.g., switching from “exemption, credit, and refund” to “exemption and refund”), taxpayers must first settle all tax refunds (exemptions) related to previously exported transactions, and may not file returns for those transactions after the change.
The New Announcement permits taxpayers to proceed with the change without first settling tax liabilities in the following four special circumstances. Taxpayers need only submit the Report Form for Unsettled Tax Refunds (Exemptions) on Export Transactions to make the change in advance, and relevant export transactions may continue to be reported for export tax refunds (exemptions) after the change:
| Circumstance | Notes |
| Where the taxpayer has not yet collected all of the export tax refund (exemption) declaration vouchers, declaration accompanying materials, and foreign exchange collection materials, thus temporarily unable to declare export tax refund (exemption). | Due to objective circumstances, the conditions for filing have not yet been met. |
| Where export tax refund (exemption) has been declared but the competent tax authority is temporarily unable to conclude the export tax refund (exemption) due to tax inspection, export tax-related inquiries, or other reasons. | Due to issues on the tax authority’s end, the case cannot be closed immediately. |
| Where the taxpayer has conducted business in accordance with the post-change business model within thirty days before applying for the change. | The business model has undergone a substantial adjustment. |
| Where it is found, before the competent tax authority grants approval for export tax refund (exemption) for the first time, that the record-filing of the tax refund (exemption) method was erroneous. | Lack of familiarity with the policy led to the selection of the wrong approach. |
c) Change of Competent Tax Authority: Unreported Transactions to Be Handled by the New Tax Authority
When a taxpayer applies to change the competent tax authority (e.g., due to relocation), the original tax authority may process the change application only after completing all pending export tax refund (or exemption) matters. Matters related to export tax refunds (or exemptions) that have not yet been applied for (including unreported export transactions) must be submitted to the new competent tax authority.
d) Handling of Sales Returns: Clear Rules for Offsetting Negative Amounts
For export transactions that have already received export tax refunds (or exemptions) and subsequently involve sales discounts, cancellations, or returns, the taxpayer must offset the original export tax refund (or exemption) declaration data with a negative amount in the month the event occurs or the following month. After the offset, the matter shall be handled separately in accordance with the relevant tax refund (or exemption) regulations:
- Enterprises subject to the exemption-credit-refund method: If, with the declaration of the negative sales, the overall monthly export refund indicates a negative amount, the negative amount should be carried forward to next period which means no immediate repayment of the taxes. With a positive amount, tax authority shall process the export refund for the taxpayer.
- Enterprises are subject to the exemption-refund method: If, with the declaration of negative sales, the overall monthly export refund indicates a negative amount, such amount shall be repaid to the tax authority. With a positive amount, tax authority shall process the export refund for the taxpayer.
e) Situations In Which Processing of Export Tax Refund (or Exemption) Are Suspended
Where the competent tax authority discovers that a taxpayer falls under any of the following circumstances, the taxpayer’s export tax refund (exemption) shall not be processed temporarily:
- The status of taxpayers is marked as abnormal,
- Taxpayers have overdue and unpaid refund repayments,
- Taxpayers refuse to cooperate with refund-related inspections;
III. Comprehensive Benefits for Export and Manufacturing Companies
In summary, the Announcement will bring the following specific benefits to export and manufacturing Companies:
Lower filing thresholds: One form replaces five, and all supporting documents are listed on a single checklist, reducing errors and preparation time.
More flexible change mechanism: Under four specific circumstances, enterprises can change their refund method without settling taxes first, avoiding business delays caused by immediate settlement requirements.
Clearer rules for cross-district relocation: Responsibilities of old and new tax authorities for unreported business are clearly divided.
More reasonable refund handling: Under the exemption-credit-refund method, negative balances carry forward to the next period, easing cash flow pressure. Under the exemption-refund method, repayment rules are explicit and predictable.
More predictable enforcement boundaries: Four scenarios for suspending refunds are clearly listed, with “refusal to cooperate with verification” as a key trigger, giving enterprises clear compliance guidance.
How can we help you?
Eloise Yao
Of Counsel
