Value Added Tax Planning

PassageMaker is in a unique position to help our clients develop a cost-effective VAT strategy as according to our knowledge, we are the only US-owned Contract Assembly/ Inspection facility to be granted full import-export rights and authorized to process VAT rebates by the Chinese government in Shenzhen.

Overlooking the impact of VAT on your sourcing project can lead to major complications:

• Problem: If you don’t know the VAT rebate amount, then you don’t really know your vendor’s true pricing. This can complicate negotiations and vendor comparisons. The vendor may be pocketing the VAT rebate without explaining to the buyer.
• Solution: As part of our Sourcing Feasibility Study, we leverage our VAT licensing to check with the tax bureau and custom’s authorities to keep sub suppliers honest about VAT and offer full visibility to our clients.
• Problem: Unlike PassageMaker, many factories (and even inspection/assembly centers) lack import-export rights and proper VAT processing facilities. They are forced to use 3rd party trading companies which inflate the price, complicate the relationship and leak proprietary information.
• Solution: As part of our Vendor Coordination and/or Assembly & Inspection services we can facilitate a transparent VAT application and eventual refund in full accordance with local regulations to ensure the client is not overcharged by a 3rd Party or exposed to any unexpected tax liabilities.

As a service to our clients who utilize PassageMaker for Sourcing Feasibility Studies, Vendor Coordination and/or Assembly & Inspection, we provide VAT analysis and processing free of charge!

Visit the FAQ page and article database for more information on the China VAT system.

A VAT study can also be conducted as an independent project in cases where the client has existing suppliers and operations in China that need to be reviewed.

Method of Research

Business Consultants, Accounting Firms and Lawyers tend to give theoretical advice on how things “should work in China for an average company”.  PassageMaker on the other hand has its own operations processing VAT in mainland China.  So rather than receiving a long winded, technical report on “how VAT should work for an average company in China ”,  our team will put themselves in the client’s shoes and offer easy to understand description of “what we would do in your exact situation based on the realities of your suppliers, your products and your company structure”.

Primary tasks include:

• Contact with relevant authorities to confirm the applicable VAT rebate amount for the given production classification.
• Review of current quotations and terms from client’s vendors in order to advise on VAT strategy.
• Review of client’s PRC based entities’ business license, tax payer status and scope of business in order to advise on efficiency of VAT processing.
• Review of client’s vendor’s business license, tax payer status and scope of business in order to advise on efficiency of VAT processing.
• Provision of “VAT Strategy Assessment and Suggestions” report in an easy to understand, English language format.

Most projects follow the following steps:

Step I:              Document Review

Step II.            Communications with Customs Bureau and Vendors

Step III.          Analysis of Findings/ Report Creation

Step IV.          Delivery of Findings/ Conference Call

Fee Structure

VAT Survey fees take into consideration three main factors:

ONE: Number of Vendors Involved

TWO: Number of Production Classifications For example, do all the products fall under one HS code or are there many different classifications that will each need to be reviewed with customs bureau to confirm applicable VAT rebate.  

THREE: Stage of Development “Off the shelf” items currently in production in China that require less explanation to customs bureau than conceptual products that have not yet been actual produced, let alone exported.

Well Developed= commodity type product, readily available, well known by customs bureau.

Average= available in China, but not well known to customs bureau.

Complex= product that has physical samples and well defined concept, but not yet in production in China.

Difficult= product that has no physical samples and has not yet been produced in China.

VAT Study Quote Calculator
Base Price for 1st Production Classification		12500 RMB
Number of Vendors	Add 2000 RMB if over five vendors, 4000 if over 10 vendors, 6000 if over 15 vendors and so on
Stage of Development	Subtract 2000 RMB if project is well developed Add 2000 if the project is complex Add 4000 if the project is difficult
Additional Production Classification 1		10500 RMB
Number of Vendors	Add 2000 RMB if over five vendors, 4000 if over 10 vendors, 6000 if over 15 vendors and so on
Stage of Development	Subtract 2000 RMB if project is well developed Add 2000 if the project is complex Add 4000 if the project is difficult
Additional Production Classification 2		10500 RMB
Number of Vendors	Add 2000 RMB if over five vendors, 4000 if over 10 vendors, 6000 if over 15 vendors and so on
Stage of Development	Subtract 2000 RMB if project is well developed Add 2000 if the project is complex Add 4000 if the project is difficult

Visit the FAQ page and article database for more information on the China VAT system.