On Oct 8th, 2018, the Chinese State Council held an executive meeting and decided to increase the tax rebates for export goods from Nov 1st, 2018. The move is designed to help Chinese industries amidst escalating trade pressures caused by the ongoing trade disputes with the United States.
China’s chemical industry has been significantly impacted by the trade dispute with the United States. In September, the U.S. government announced an increase of 10% in tariffs on $200 billion worth of Chinese imported goods. The scope of tariffs included 6048 HS codes and included 1435 chemical products (23.7% of all goods subject to the tariff increase).
The tax rebate rate after the adjustment is shown in following table:
Current tax rebate | Tax rebate after adjustment |
15% | 16% |
13% (part) | 16% |
9% | 10%, up to 13% |
5% | 6%, up to 10% |
There’s no doubt that the chemical industry will benefit from the tax rebate adjustment. Take the production of phenol for example, it was subject to a 25% increase in import tariffs by the United States earlier in August. After the adjustment, the tax rebate for phenol will increase from 5% to 9%. In addition, two of the most important raw materials for phenol production, benzene and propylene have both increased in price. So the phenol manufacturers could raise the price accordingly. All these factors combined could mean that the phenol manufacturers will see improved profit margins.
This is the 2nd time that Chinese government adjusted the tax rebate in recent months. On Sep 5th, 2018, the Ministry of Finance (MOF) and the State Administration of Taxation jointly raised the export tax rebate for a total of 397 kinds of products, 93 of which were petro-chemical products such as MDI, epoxy resins, etc. Some products enjoyed a rise in tax rebate up to 16%.
To better support the State Council’s adjustment of tax rebate, the State Administration of Taxation carried out some detailed measures on Oct 15th, 2018 to help enterprises to receive the export tax rebate payment faster, including implementing a total electronic rebate application system, lowering the qualification requirements of the enterprises that apply for the tax rebate, etc.
