Currently, a large number of foreign trade, production and export enterprises encounter common financial and taxation problems: the tax rate for goods with HS codes is 13%, and the tax refund rate is 13%. Full tax refunds are available if conditions are met, but foreign exchange cannot be recovered throughout the order process, and the supplier has issued a compliant special VAT invoice.
Many financial institutions have misunderstandings: if they do not collect foreign exchange, they will directly pay the 13% value-added tax as deemed domestic sales.
Once you make a mistake in judgment, you will either have to bear a large amount of sunk costs for input, or you will incur late payment fees and trigger tax inspections if you fail to declare after the due date.
1 There are four rigid prerequisites for export tax refund (exemption), and foreign exchange collection is the necessary threshold
According to Article 1 of Announcement No. 11 of 2026 of the Ministry of Finance and the State Administration of Taxation, goods are subject to export VAT refund (exemption). Four conditions must be met at the same time, and none of them is indispensable:
- The goods are actually sold to overseas entities or individuals;
- Complete customs declaration and actual departure of goods;
- Enterprises confirm export sales revenue in accordance with accounting standards;
- Complete foreign exchange collection in accordance with regulations (including special circumstances specified in the policy that are deemed to be foreign exchange collection).
Most of the businesses discussed this time meet the first three items, but lack bank exchange collection flow and no foreign exchange repayment, which directly does not meet the core threshold for tax refunds.
Even if the HS code tax and refund rate is 13%, the input invoice is fully compliant, and there is no evidence of compliance with the collection of foreign exchange, the full tax refund cannot be claimed normally. The company will apply two treatment methods of “export tax exemption” or “deemed domestic sales tax” in stages.
2 There are two scenarios for not collecting foreign exchange, distinguishing between tax refund, tax exemption and deemed domestic sales
Scenario 1: If you meet the 10 categories of deemed foreign exchange collection, you can apply for tax refund of 13% and 13% tax refund normally
It does not mean that tax refunds cannot be made without bank exchange flow. The attachment of the Tax Administration Announcement No. 5 of 2026 clarifies that 10 categories are deemed to be foreign exchange collections. Enterprises retain the “Foreign Exchange Collection Situation for Exported Goods” +
A complete set of evidentiary materials will be regarded as completion of foreign exchange collection and normal processing of tax refunds: 1. Large fluctuations in overseas market conditions; 2. Claims for the quality of exported goods; 3. Loss and deterioration of fresh goods; 4. Force majeure such as wars and natural disasters; 5. Bankruptcy and liquidation of overseas purchasers; 6. Large fluctuations in the importing country’s exchange rate; 7. Overflow and shortage of goods; 8. Forward exchange collection contracts; 9. Export credit insurance compensation; 10. Other objective reasons recognized by the tax authorities.
Red line of time limit for foreign exchange collection: Regular orders must collect foreign exchange before April 30 of the year following customs declaration for export; forward contracts shall not exceed 36 months from the date of customs declaration for export.
If you simply do not collect foreign exchange and do not have the above-mentioned objective supporting materials, you will be directly disqualified for tax refund.
Scenario 2: Ignore the supporting materials for the same exchange collection and handle the compliance in two stages
Stage 1: Within 36 months from the date of customs declaration for export, the declaration period has not been exceeded – export tax exemption (no tax, no tax refund) is applicable
According to the 2026 New Deal, for orders that cannot collect foreign exchange and do not qualify for deemed foreign exchange collection, priority will be given to export tax-free declaration, and there is no need to directly treat it as domestic sales tax.
Core rules: The export link is exempt from VAT, but the input tax corresponding to the purchased goods must be transferred out in full and included in the main business cost, and cannot be deducted from domestic sales.
Applicable pros and cons: The operation is simple, and there is no need to accrue output items, but the 13% tax and 13% refund of the input items will be fully sunk, and the cost of cash flow occupancy is high.
Supplementary benefits of the new policy: A single order waives tax refund and becomes tax-free. There is no need to submit an overall tax refund filing. It does not affect tax refunds for other normal orders of foreign exchange collection by the company. There is no 36-month limit.
Only if an enterprise declares in writing that it will give up tax refunds for all export businesses, it will not be allowed to resume tax refund qualifications within 36 months.
Stage 2: After 36 months of export declaration, no tax refund or tax exemption declaration has been made – it will be deemed as domestic sales and taxed
Article 7 of the Implementation Regulations of the Value-Added Tax Law and Finance and Taxation Announcement No. 11 of 2026 clarifies: It has been 36 months since the customs declaration for export of exported goods, and neither the foreign exchange collection materials have been collected to declare tax refunds, nor tax exemption declarations have been made as required. The refund and tax exemption policy is no longer applicable, and 13% VAT is compulsorily accrued as deemed domestic sales. This is the only statutory situation that requires deemed domestic sales.
Returning to the opening question: only “do not collect foreign exchange, ignore the same materials for collecting foreign exchange”, as long as within the 36-month period, the compliance treatment method is export tax exemption; only if it has not been declared for more than 36 months, it must be regarded as domestic sales and taxed.
3 Practical points on deemed domestic sales tax calculation and input deduction
There are misunderstandings in most finances: full tax must be paid if it is regarded as domestic sales, and input invoices cannot be deducted. The 2026 New Deal clearly corrects this understanding:
Output tax calculation rules
The tax calculation basis for deemed domestic sales is the free on board (FOB) RMB amount of the exported goods, and a 13% tax rate applies to the output.
Formula: Output tax = Export FOB RMB amount ÷ (1+13%) × 13%.
Input invoice deduction rules (differentiating enterprise types)
- Foreign trade enterprises (tax refund exemption method): If you check the original tax refund invoice, apply to the tax bureau for the issuance of a “Certificate of Transfer of Export Goods to Domestic Sales” in the same month, change the purpose of the invoice to deduction, and input will be deducted normally in the current period;
- Manufacturing enterprises (tax exemption, offset and refund method): There is no need to issue a certificate for domestic sales. The input tax originally participated in the domestic sales deduction and can be adjusted directly in the value-added tax return.
Practical cases assist understanding: The FOB price of goods of a foreign trade enterprise is 113,000 yuan, the purchase cost excluding tax is 80,000 yuan, and the input tax is 10,400 yuan. If the foreign exchange is not collected for more than 36 months, it shall be regarded as domestic sales.
Output tax = 113,000÷1.13×13%=13,000 yuan; value-added tax payable for the current period = 13,000-10,400=2,600 yuan.
Comparing the export tax exemption plan: the input amount of 10,400 yuan is transferred out in full without any deduction, and the tax burden gap is significant. Therefore, the overdue amount is regarded as domestic sales, but the input loss can be recovered.
4 Failure to collect foreign exchange and handle business in compliance with regulations, two core tax risks
Risk 1: Overdue tax payment and late payment fees will occur
If the goods have been declared for 36 months without tax exemption/refund declaration, the tax authorities will order the enterprise to make up the output tax after verification, and a late payment fee of 0.05% will be imposed on a daily basis starting from the month after the tax liability occurs; if a tax refund has been declared in the previous period and the negative offset declaration has not been made in time, the refunded tax must be fully recovered.
Risk 2: Risk of special verification of false tax refunds
The company knows that it cannot collect foreign exchange, ignores the same materials for collecting foreign exchange, and still declares a full tax refund for a long time and does not offset the tax refund data. The Golden Tax System automatically flags suspected risks and initiates a special inspection of export tax refunds.
The inspection focuses on checking the consistency of customs declarations, procurement invoices, logistics, and contracts; verifying business fraud, in addition to tax recovery and late payment fees, imposing a fine of 0.5 to 5 times the tax, suspending export tax refund management categories, and restricting tax refund processing.
5 Pre-planning plans for businesses that do not collect foreign exchange to reduce tax-related costs
- When signing a contract, priority is given to cross-border RMB settlement. The bank’s RMB receipt voucher is equivalent to foreign exchange collection, avoiding the risk of no foreign exchange collection from the source;
- Predict the customer’s inability to pay, retain bankruptcy documents, claim forms, quality claim agreements, etc. in advance, match the 10 categories of deemed foreign exchange collection policies, and provide normal tax refunds;
- When the order cannot be collected in foreign exchange, the tax burden will be calculated within the 36-month period: compare “export tax exemption (input is transferred out in full)” and “overdue domestic sales (input can be deducted)”, and choose the best to plan and declare in advance;
- Establish an export collection ledger, mark the customs declaration date of each order, set an early warning 3 months before the 36-month critical period, and complete tax exemption or tax refund declarations on schedule.
