New Milestone in Tax Rebate Filing

China took an important step forward in expediting export tax rebates in September, formalizing the role of comprehensive foreign trade service companies. In a joint statement, the Ministry of Commerce, the General Administration of Customs, the State Administration of Taxation, the General Administration of Quality Supervision, Inspection and Quarantine and the State Administration of Foreign Exchange issued their Notice on Promoting the Healthy Development of Foreign Trade Comprehensive Service Enterprises (Trade Letter [2017] No. 759, commonly referred to as Document 759).

Document 759 gives specific policy protection to these companies so they can handle tax rebates -- a gray area in the past -- and act as general commercial agents in a wide range of commercial activities. The move is part of an effort to carry out the tasks outlined in the government's 2017 Work Report and aimed at boosting foreign trade, encouraging regulatory innovation and promoting the business of these foreign trade comprehensive service companies.

In addition to performing the often complex task of applying for export tax rebates, foreign trade comprehensive service enterprises work with importers and exporters and can handle customs declarations and quarantines, logistics, clearing, trade assurance and coordinating trade credits. They collect agency fees and theoretically should not be liable for import and export disputes involving the companies they represent.

Prior to the promulgation of No. 759 Document, however, there was a lack of clarity on the permitted activities of comprehensive service enterprises. In some cases, these enterprises had to bear the regulatory risks, often pretending to be the actual exporter or importer in order to be a one-stop shop that could complete foreign trade formalities.

Document No. 759 clarifies the legal status of the foreign trade comprehensive service enterprises as proxy service providers, so that the enterprises can justifiably carry out the businesses in the process of delivering foreign trade agency services, free from the uncertainties over their legal identity or status as an agent. They have their own legal rights and obligations.

Comprehensive trade service enterprises need to be able to offer strong professional support services for the import and export trade, as well as Internet technology capabilities and big data analysis and processing capacity. They can operate independent electronic business platforms that can boost efficiency in processing this trade related information. With the click of a mouse, customs clearance data, tax rebate data or other trade procedures can be completed. As an independent trade service platform, these companies can aggregate the work of import and export enterprises, thereby reducing costs and contributing to the nation's structural reforms. The use of big data can also help achieve more effective foreign trade results.

Tax Rebates
Prior to the issuance of the new rules, these comprehensive service enterprises had to sign   contracts with the export enterprises as well as their foreign customers. Such complex application procedures for export tax rebates took time to process and presented significant legal risks for the service enterprises.

The concept of foreign trade comprehensive service enterprises was officially introduced in 2013 by the State Administration of Taxation in its Notice on Issues Related to Export Tax Rebates or Tax Exemptions Concerning Foreign Trade Comprehensive Service Enterprises. The regulation stated that goods sold by producers to comprehensive service enterprises -- once a contract was signed -- could be entitled to tax rebates and exemptions upon export. That removed some of the concerns of foreign trade comprehensive service enterprises that they might be considered engaging in illegal activities if they applied for tax rebates in their own name.

Financing Role
Financing plays a pivotal role in sustaining manufacturers and trading companies. S