Measures for the Administration of Refund of Chinese Value-added Tax on Goods and Services Purchased by Foreign Diplomatic
1. The present Measures are formulated in accordance with the provisions of The Vienna Convention on Diplomatic Relations, The Vienna Convention on Consular Relations, The Regulations of the People?s Republic of China on Diplomatic Privileges and Immunities, The Regulations of the People?s Republic of China on Consular Privileges and Immunities, The Provisional Regulations of the People?s Republic of China on Value-added Tax and other laws and regulations.
2. The Government of the People?s Republic of China will, under the principle of reciprocity, refund value-added-tax (VAT) levied on goods and services purchased in China by the foreign diplomatic (consular) missions, their diplomatic agents (consular officers) as well as members of their administrative and technical staff who are neither Chinese citizens nor permanent residents in China (hereinafter referred to as ?the Eligible Beneficiaries?).
3. For the purpose of these Measures, VAT-refundable goods and services refer to those which are subject to VAT pursuant to The Provisional Regulations of the People?s Republic of China on Value-added Tax, on which VAT has been levied according to the regulations currently in force and of which the aggregate sum as indicated on an individual invoice equals or exceeds RMB 800 yuan. This required minimum sum, however, does not apply to invoices for tap water, electricity, home-use gas, and heating or maintenance/repair services.
4. VAT refund claims of the Eligible Beneficiaries shall be made by foreign diplomatic missions in China. Each diplomatic mission shall, on a quarterly basis (i.e. based on the issuance date of related invoices or the signing date of relevant Audit Report on the Final Accounts of Completed Capital Works Project), add up the sums of its (and the relevant consular missions?) refundable VAT incurred in the preceding three months; fill in The VAT Refund Application Form for Diplomatic (Consular) Missions in China, The Consolidated Breakdown of VAT Refund Claims of Diplomatic (Consular) Missions in China and The Itemized VAT Refund Claims of Diplomatic (Consular) Missions in China and submit them, along with the relevant VAT payment proof and/or other documents provided for under the present Measures, to the Protocol (Consular) Department of the Ministry of Foreign Affairs no later than the tenth day of the first month of the following quarter. The Protocol (Consular) Department will, under the principle of reciprocity, verify, register and stamp all submissions and forward them in their entirety to the Beijing Municipal State Tax Administration (BMSTA) for refund processing. VAT refund claims for goods or services purchased during the last ten days of a quarter may be made together with those purchased in the following quarter. The Protocol (Consular) Department shall not process any VAT refund application submitted after the deadline set in the present Measures. The tax authorities shall not grant such refunds.
The VAT Refund Application Form for Diplomatic (Consular) Missions in China must be signed by the head of the diplomatic (consular) mission or a diplomatic agent (consular officer) under his/her authorization before it becomes valid. The authorization documents and signature samples must be submitted in advance to the Protocol (Consular) Department for record.
5. VAT refund claims of the Eligible Beneficiaries shall be attached with original ordinary invoices for purchase of the related goods and/or services. Each invoice must be completed according to the relevant provisions and must indicate its real and exact date of issuance. In case that an Eligible Beneficiary has to keep an original invoice for justifiable reasons, the original plus its photocopy must be shown to the BMSTA via the Protocol (Consular) Department. The BMSTA shall stamp the original and return it to the diplomatic (consular) mission via the Protocol (Consular) Department, and keep the photocopy for refund purposes.
If an invoice for consumed tap water, electricity, home-use gas or heating is issued by a property management company instead of the relevant utility suppliers, the property management company shall clearly indicate on its invoices the exact amount of tap water, electricity, home-use gas, hot water and heating that have been actually consumed or the exact floor space covered by the heating service. The diplomatic (consular) missions concerned shall attach such invoices to their VAT refund claims. The state tax administrations of cities where the consular missions are located shall inform the BMSTA in an official document of the exact prices of tap water, electricity, home-use gas and heating actually charged by the utility suppliers. The BMSTA will then determine a unit refund rate on the basis of these prices and VAT rates. In case of any price readjustment, the unit refund rate shall be readjusted accordingly in good time. The diplomatic (consular) missions shall calculate and claim VAT refund in accordance with the exact consumptions as indicated on the invoices issued by the related property management companies and the unit refund rate determined by the BMSTA.
In the case of building materials or equipment for the construction or interior decoration of the premises of a diplomatic (consular) mission, an Audit Report on the Final Accounts of Completed Capital Works Project issued by a public accounting firm lawfully registered in China shall be provided and no ordinary invoice will be needed. Such audit report shall be accompanied by
i an auditing contract signed between the diplomatic (consular) mission in question and the public accounting firm;
ii a construction or interior decoration contract signed between the mission and the contractor(s); and
iii a project final accounts report provided by the contractor(s) to the mission.
The public accounting firm shall conduct its audit in compliance with the relevant laws and regulations and on the basis of the lawful and valid proof or documents relating to the purchase of building materials and equipment by the diplomatic (consular) mission or contractor(s), and the exact purchase price and the quantity of such materials and equipment actually used for the purpose of the premises. The public accounting firm shall also keep a record of all proof, documents and other materials used in its audit. The Audit Report on the Final Accounts of Completed Capital Works Project must itemize the exact sum of payment (including VAT) incurred for building materials and equipment actually used for the premises of the mission according to their categories and must list their corresponding VAT rates. The BMSTA shall carry out a random examination of the audits of the public accounting firms concerned. If a public accounting firm is found to have failed to comply with provisions of the relevant laws or regulations in its auditing process, thus resulting in a VAT refund underpayment or overpayment, the BMSTA shall make up for the underpayment to the Eligible Beneficiaries or shall request the mission concerned to return the overpaid sum. In the meantime, the BMSTA shall report such irregularities to the State Administration of Taxation. The latter shall inform the Ministry of Finance, the National Audit Office and the Chinese Institute of Certified Public Accountants of these cases and request them to deal with these irregularities according to the provisions of The Law of the People?s Republic of China on Certified Public Accountants and other laws and regulations.
6. Refundable VAT on tap water, electricity, home-use gas, hot water and heating for which property management companies have collected fees and issued invoices shall be calculated according to the following formula:
Refundable VAT = Quantity of actually consumed tap water, electricity, home-use gas, hot water and heating or the floor space of heating service × Corresponding unit refund rate
Refundable VAT on services and other goods shall be computed according to the following formula:
Refundable VAT = Taxable amount × Applicable VAT rate
Taxable Amount = Total sum (VAT included) of actually used building materials and equipment as indicated on ordinary invoices or in Audit Report on the Final Accounts of Completed Capital Works Project ÷ (1 + Applicable VAT rate)
7. The BMSTA has the right to reject any VAT refund claim if goods or services involved are obviously overpriced or oversupplied for no justifiable reasons.
8. After receiving and verifying the quarterly VAT refund applications submitted by the foreign diplomatic (consular) missions, the Protocol (Consular) Department will forward them to the BMSTA. The BMSTA shall examine these applications to see if all required documents, invoices and/or other proof are complete and authentic and if the VAT refund rates (amount) applied and claimed are right and the refundable VAT computing logic correct. Once they are confirmed as positive, the BMSTA shall approve them and remit the refunded VAT directly to the corporate RMB bank account of the diplomatic mission concerned. The diplomatic missions shall promptly inform the Protocol Department in writing of any change of their corporate bank account.
9. The Eligible Beneficiaries shall not claim refund of VAT on any purchased goods that have been returned or transferred to the possession or ownership of other entities or individuals. In the event that VAT on such goods is mistakenly refunded, the recipient shall repay it to the BMSTA via the Protocol Department and complete the VAT repayment procedure. The VAT to be repaid shall be calculated according to the taxable amount previously refunded or the price of transfer. The VAT so levied shall all be turned over to the central treasury. If a transfer of taxable goods needs to be checked and approved by the Protocol Department of the Ministry of Foreign Affairs, the Department may go through such transfer procedures subject to its confirmation that VAT on the goods in question has not been refunded or the refunded VAT has been duly repaid.
10. As regards self-use gasoline and diesel purchased by the Eligible Beneficiaries, their VAT refund shall continue to be governed by The Note of the Protocol Department of the Ministry of Foreign Affairs of the People?s Republic of China on the Exemption of VAT on Gasoline and Diesel for Motor Vehicles of Diplomatic Missions in China ( Li Zi No. 001).
11. For the purpose of the Measures, the ?diplomatic agents (consular officers)? and ?administrative and technical staff? refer to persons provided for in items (5) and (6) of Article 28 of The Regulations of the People?s Republic of China on Diplomatic Privileges and Immunities and those specified in items (4) and (5) of Article 28 of The Regulations of the People?s Republic of China on Consular Privileges and Immunities.
12. The accredited offices of international organizations in China and their internationally recruited staff of foreign nationality who enjoy the same privilege of tax exemption as that of staff of foreign embassies in China may be eligible for VAT refund subject to the provisions of the present Measures.
13. In case there is a separate agreement between the Chinese side and a foreign country on tax refund, the said agreement shall apply.
14. The present Measures shall enter into force as of 1 April 2003. In case of any discrepancy between the regulations previously promulgated and the present Measures, the latter shall prevail.