VAT refund for individuals in the PRC or Tax Free

It is common knowledge that the price we pay for a product in a store is made up of numerous components. One of them is value added tax (VAT). Which in many cases can be refunded. We will talk about how to do this in this article.

Clearly, VAT refunds by legal entities and the like, as well as related issues such as the minimum turnover of a company for the ability to issue special invoices (专票 instead of 普票) – is too extensive a topic for us to dwell on here. Therefore, now we will only talk about Tax Free – VAT refund upon purchase of products by an individual and subsequent departure from the country.

As usual, we will consider an example – specifically, how and what can be refunded after purchasing consumer electronics, in our case, an iPhone 8.

In this case, you can get back 11% of the cost of the product. Which makes the purchase of these very electronics and mobile phones no less profitable than in tax-free Hong Kong. For example, the latest iPhone 11 Pro is priced at 8,699 yuan in the mainland and 8,599 Hong Kong dollars in Hong Kong, respectively (7,694 yuan). Subtracting 11% VAT from the Chinese price, we get 7,743 yuan, which is almost equal to the price in Hong Kong.

Unlike many other countries, where you should not be a resident of a this country for VAT refund, in China you only need to comply with simple time requirements:

1. no more than 180 days should elapse from the date of the last entry to the date of the next departure
2. no more than 90 days should elapse from the date of purchase to the date of departure
3. the purchase should amount to more than 500 yuan and be made in one transaction (one receipt)

Everything is counted according to the stamps in the passport. If you use electronic checkpoints (e通道) – please take slips with the date of crossing the border from the machine right behind the turnstiles.

If these requirements are met, we can move on to the next point. On the website of the tax office of your city (for example, Beijing), you need to select a store participating in the Tax Free program (离境退税). There were 508 stores in total in 2018 – there are plenty to choose from. Unfortunately, the Apple Store does not participate in the program, so we will opt for a large electronics retailer – 苏宁 (Suning)

You have to personally come to the store with your passport and pay for the purchase. Then say “我要办离境退税手续”. If the cashier has already dealt with this procedure (which is highly unlikely, since few people even know about the existence of Tax Free in China), prompt them to issue two documents:

1. issue an invoice (开发票), in which your full name and passport number should be indicated
   
2. fill out 境外旅客购物离境退税申请书 (VAT refund application for purchases by foreign tourists).

It takes on average from 5 minutes to 2 days (depending on the laziness of a particular cashier) and, having obtained these two documents, you just need to keep them safe until the departure date.

To receive money on the day of departure, you need to arrive at the airport an hour or two in advance and ask the staff where you can get a VAT refund. In Terminal 3 of Beijing Capital Airport, for example, the counter is located just to the right of the body-search scanners in the international departure zone.

Please note that not all airports have this counter. Its presence/absence depends on the specific province and its legislation regarding VAT refunds. But it will always be AFTER passport control. This means that if you are flying on a Beijing-Harbin-Vladivostok flight, you will not be able to refund VAT in Beijing.

Since the airport VAT refund counters are owned by a third party, they will charge you another 1.5% commission. That is, in total, you will receive 9.5% of the cost of the product.

VAT rates for different types of goods differ. The above example is for consumer electronics only. The final amount to be returned will be known only at the time of receiving it in your hands

VAT refunds do not apply to all product groups. It is pointless to provide complete lists, but you can be guided by the list of stores on the website of your local tax office – if the store is a member of this program, then with a high degree of probability this will apply to its entire product range. If not, you will be informed about it during the payment, but in any case, it is better to clarify in advance, before buying.

After that, the situation differs slightly across airports. As mentioned, the refund counter is AFTER passport control (as opposed to the customs window where you need to start). You should arrive at the airport well in advance and find the “VAT refund” sign. As a rule, it is somewhere at the check-in counters. After that, the customs officer puts a stamp on your application and you can go through passport control and then head directly for the Tax Free refund window.

Next, you indicate the return method (most conveniently – to a Visa/Mastercard card), give them an application stamped by customs, the passport and the boarding pass and wait for the employee to fill out the application. Upon completion, you will be given a receipt and all you have to do is wait for the crediting of money. The maximum waiting period is 60 banking days.

As you can see, the agent’s commission is 2%. That is, in total, I managed to refund 9% of the cost of the phone, which, be that as it may, is very significant. The total amount exceeds this share, since I refunded VAT for several purchases at once.

The money transfer took up about 3 months, I applied to the airport Tax Free refund booth on December 30, and they were credited to the account on March 9.

In any case, it will be easier later. In 2019, a widget was launched and the instant money refund feature was introduced.

However, as of 2020, there are some difficulties. Due to the fact that the widget has just appeared, so far it only supports Beijing and only some stores in it, while in the rest you will have to do it the old way – according to the guide above.

And to use 即买即退 (buy&refund), you need to have a bank card with a pre-authorization function (almost any bank card except for some debit cards). The store will refund VAT immediately, but will block the corresponding amount on the card in order to avoid fraud (for example, when a foreigner decides to buy a product, receive VAT and return the product back to a store of the same chain), after which the foreigner will also need to contact the Tax Free counter at the airport at the time of departure, where this amount on the card will be unblocked. The advantage here is that the transfer requires almost 3 months (as described in the guide), and the removal of pre-authorization takes 1-2 days.