Claiming China’s export tax rebate is no longer possible for aluminum and copper products, while 209 other items face reduced rates starting Dec. 1, 2024.
Until now, many companies had been setting up Chinese trading entities specifically to claim these rebates – and with the old 13% rate, it often made financial sense. But with rebates now completely eliminated for some products (particularly aluminum and copper), it’s time for a serious rethink about whether maintaining a Chinese entity is still cost-effective.
For companies still qualifying for the new 9% rebate, the calculation needs careful consideration. While 9% looks attractive on paper, once you factor in entity maintenance costs, monthly accounting fees, and compliance requirements, you might find the actual savings are significantly diminished by administrative overhead.
Fortunately, we’ve got two strategic approaches that could not only match but potentially exceed the savings you’d get from claiming that 9% rebate directly. Here’s what you need to know:
Why Traditional Methods No Longer Cut It
The traditional approach to claiming China’s export tax rebate involves establishing a trading entity in China to process claims directly.
For a company exporting $1 million in goods, a 9% rebate would theoretically yield $90,000. However, the actual return is substantially lower after accounting for:
Annual Entity Costs:
- Entity maintenance fees
- Monthly accounting services
- Annual audit requirements
- Mandatory tax filings
Hidden Expenses:
- Staff training costs
- Compliance monitoring
- Documentation processing
- Banking fees
- Profit requirements (your entity must generate taxable income)
- Paying VAT to vendors
You could easily end up spending most of your rebate just maintaining the structure.
Obviously, for those exporting significantly more, a 9% rebate still beats the fixed costs.
But the lower rate means most businesses need to find smarter ways to handle VAT claims with less paperwork and better returns.
Tip 01: Get Suppliers to Do the Heavy Lifting
A smart way to benefit from export rebates is to not claim them at all – well, not directly anyway.
Instead of spending thousands on setting up and running a Chinese entity, get your suppliers to do the heavy lifting for you. They’re already set up to handle rebates, so why reinvent the wheel?
How It Works:
- Research the exact rebate rate for your products (9% for most items)
- Calculate what your supplier will receive back in rebates
- Use this knowledge to negotiate better pricing
- Get the supplier to factor the rebate into your purchase price
Here’s what this looks like in practice:
- On $100,000 of Chinese imports, there’s a potential 9% rebate ($9,000) available. Rather than setting up an entity to claim this yourself, negotiate with your supplier to share the benefit.
- A supplier might offer you a price of $94,000 – that’s $6,000 in immediate savings without the overhead of maintaining a Chinese entity or the complexity of running profits through it.
While you’re not capturing the full 9% rebate, the net benefit is often comparable or better.
Moreover, suppliers typically inflate their prices when selling to foreign trading entities that claim rebates themselves, knowing these companies will recoup costs through the rebate system.
By avoiding entity setup costs, eliminating administrative overhead, and securing more competitive initial pricing, this approach often yields better bottom-line results with significantly less complexity.
Tip 02: Cut Entity Costs Completely
You can slash your costs even further by ditching the need for a Chinese entity altogether through The China Desk solution.
How It Works
The China Desk functions as your Employer of Record in China, providing:
- Full employment and HR management
- Complete payroll administration
- Office infrastructure across China
The Cost Advantage
Instead of pursuing the 9% rebate through an expensive entity setup, you’ll benefit from:
- Zero entity maintenance fees
- No monthly accounting overhead
- Elimination of compliance expenses
As the only supply chain-focused Employer of Record in China, The China Desk brings unique advantages to supplier negotiations. Our industry expertise means we don’t just handle your HR and administrative needs – we provide strategic value in supplier discussions through:
- China employee engagement
- Free consultancy sessions with teams employed via the China Desk
- Access to supply chain resources
This specialized focus means you’re not just saving on administrative costs – you’re gaining a partner who understands the nuances of Chinese supply chains and can help secure more competitive supplier agreements.
Our supply chain specialists know exactly what questions to ask and which terms to negotiate, ensuring you get the most value from your supplier relationships.
The Numbers Don’t Lie
When you combine The China Desk solution with smart supplier negotiations, you’re not just getting a portion of the 9% rebate – you’re likely saving more through:
- Zero entity maintenance costs
- Immediate cash flow (no waiting for rebate processing)
- Professional negotiation support
- Full operational control without administrative burden
When you factor in all the hidden costs of running your own entity, you’ll typically save 30-40% more using this approach than trying to claim China’s export tax rebate yourself.
Don’t chase diminishing rebates through costly entity setups. By combining supplier negotiations with The China Desk solution, you’re not just adapting to China’s new export policies – you’re building a more efficient, cost-effective operation for the long term.
If you need advice on this topic, schedule a free consultation with one of our experts!
