PRODUCT INTEGRATION

 
 

Adding customer product to display product in China should be easy, right? Not always! Below we review the different ways that you can make product integration work for your project

INTRODUCTION

 

One of the most popular requests that we receive is to import customer products into China so that we can integrate these products onto our displays.

 

This can present a challenge in that, we pay VAT on the import of those goods (and sometimes duties as well), but if the transactions are not structured correctly, we can lose the ability to get the VAT refunded on export.

 

At the most-common thirteen percent VAT rate, this can quickly add up to a lot of additional cost for our display projects.

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BACKGROUND

 

The first illustration below shows how these transactions are structured when we don’t have any customer products to integrate.

 

Working from left to right, we purchase materials from our suppliers.  Those suppliers collect VAT on each of those transactions. Then when we export the goods, we receive a VAT refund. For the sake of clarity, I’ve assumed that we pay and get back at sixteen percent; in reality different materials can have different rates.

 

It’s important to note that the maximum VAT refund is the lesser of

 

  1. The total VAT paid

  2. The Export Value of our goods multiplied by the VAT rate for that class of goods (retail displays are 13%)

 

Export Value is the sum of all materials in the display multiplied by our markup in China (if any). VAT paid is verified by official government receipts called “Fapio”.

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Tax_1.png

BACKGROUND

 

The first illustration below shows how these transactions are structured when we don’t have any customer products to integrate.

 

Working from left to right, we purchase materials from our suppliers.  Those suppliers collect VAT on each of those transactions. Then when we export the goods, we receive a VAT refund. For the sake of clarity, I’ve assumed that we pay and get back at sixteen percent; in reality different materials can have different rates.

 

It’s important to note that the maximum VAT refund is the lesser of

 

  1. The total VAT paid

  2. The Export Value of our goods multiplied by the VAT rate for that class of goods (retail displays are 13%)

 

Export Value is the sum of all materials in the display multiplied by our markup in China (if any). VAT paid is verified by official government receipts called “Fapio”.

Tax_1_edited.jpg