Shanghai foreign company A is a company mainly engaged in the procurement and export of electronic products. This year, foreign company A purchased a batch of electronic products from Guangdong, completed export and obtained export tax refunds. However, recently, it was deemed by Shanghai Taxation Bureau that foreign company A has obtained abnormal value-added tax deduction vouchers, requiring foreign company A to return the export tax refunds obtained within a specified period of time, otherwise it will be enforced by the taxation bureau.

Foreign company A entrusted Dongjin to handle it. After conducting a thorough investigation, Dongjin found that due to defects in the value-added tax special invoice obtained by the Guangdong supplier of foreign company A when purchasing parts, the Guangdong supplier was investigated and punished by Guangdong tax bureau, while foreign company A was implicated and returned the export tax refund already obtained.

Dongjin Remind:

Although foreign company A and its direct supplier have formal procurement contracts, invoices, freight records, etc. to prove the authenticity of their procurement and export transactions. However, due to the requirement of export tax refund that every link in the production and transaction chain of exported goods must comply, any problem in one of these links may result in the export company losing its qualification for export tax refund.

Therefore, Dongjin reminds all production and trading companies, especially those involved in procurement and export, to conduct in-depth background investigation and follow-up tracking of suppliers before signing the contracts. Suppliers who do not comply with financial and tax treatment regulations and even have a record of being punished by the tax bureau should be used with caution. At the same time, relevant provisions should be set up in relevant procurement agreements to regulate the financial and tax treatment of suppliers, and relevant compensation and punishment provisions should be set up for suppliers to protect their own rights and interests.

Mike Chang

Partner

mikechang@shanghaiinvest.com