In recent years, comprehensive foreign trade service providers (hereinafter “CFTSPs”) have played an increasingly pivotal role in facilitating export operations, simplifying customs procedures, and broadening the participation of SMEs in foreign trade. Recognized as a strategic policy vehicle by Chinese authorities, CFTSPs frequently engage in export tax refund (drawback) declarations on behalf of manufacturing exporters. In response, the State Taxation Administration (STA) has gradually developed a compliance framework for delegated export tax refund services centered around the pillars of registration, declaration, risk control, and supervision, while also streamlining procedural requirements.
This article, based on STA Announcement No. 35 (2017) and its subsequent updates (including Announcements No. 9 and No. 26 of 2022), provides a legal-practical analysis of the core compliance obligations, documentation responsibilities, and risk points CFTSPs face under the current regulatory regime.
I. Basis for Export Tax Refund Compliance System #
(1) STA Announcement No. 35 (2017) #
The Announcement on Adjusting and Improving Matters Related to Export Tax Refund (Exemption) by Comprehensive Foreign Trade Service Providers (STA Announcement [2017] No. 35) established the foundational compliance regime for CFTSPs engaged in delegated tax refund activities.
Article 1 provides that CFTSPs acting on behalf of domestic manufacturers must fulfill both of the following conditions:
- Be recognized as a CFTSP in accordance with MOFCOM and relevant authorities’ definitions and be registered with the competent tax bureau;
- Have in place a reasonably sound internal risk control system for delegated tax refund services, and file it with the competent tax bureau.
Article 4 further requires CFTSPs to file a Delegated Export Tax Refund Registration Form with the tax authority before initiating refund applications, and retain the following for inspection:
- The executed service agreement with the manufacturing enterprise;
- The registration form filed for each manufacturing client;
- A written statement detailing the construction and application of the internal risk control system.
Article 8 mandates that CFTSPs must submit tax refund declarations separately from exporters, using the prescribed Delegated Export Tax Refund Declaration Form, along with special VAT invoices (credit copies) and other required documents.
II. Policy Optimization and Evolving Compliance Obligations #
In 2022, the STA introduced two key reform measures to ease the administrative burden and enhance procedural efficiency for CFTSPs.
(1) STA Announcement No. 9 (2022): From Submission to Retention for Inspection #
According to Article 6(1) of the Announcement on Further Facilitating Export Tax Refund Procedures to Promote Stable Foreign Trade Development (STA Announcement [2022] No. 9):
CFTSPs are no longer required to submit the Delegated Export Tax Refund Registration Form or the internal risk control system to the tax bureau. Instead, they may retain the following materials for potential inspection:
- Service contract with the manufacturer;
- Registration form for each delegated manufacturer;
- Internal control documentation and related IT system records.
In the event of updates or changes, the revised documentation need only be retained, not re-submitted.
Key Reform: The policy shifts from mandatory upfront filing to post-filing supervision, reflecting a governance trend toward “credit-based administration + retrospective supervision.”
(2) STA Announcement No. 26 (2022): Invoice Submission Obligation Removed #
As per Appendix 5 of the Announcement on the Implementation of Deferred Submission for Certain Tax Matters and the Further Streamlining of Supporting Documentation (STA Announcement [2022] No. 26):
The requirement to submit special VAT invoices (credit copies) during delegated refund applications is removed. These invoices now form part of the taxpayer’s retained records for potential inspection.
Compliance Risk: Article 2(2) of the same announcement stipulates that taxpayers bear full legal responsibility for the authenticity and legitimacy of retained documentation. Any future discovery of forgery, alteration, or fabricated transactions may lead to legal liability.
III. Summary of Core Compliance Obligations #
| Stage | Obligation | Current Legal Basis |
|---|---|---|
| Pre-engagement | Sign formal service contract; establish and implement internal controls | Retention only; per 2022 No. 9 |
| First-time engagement | Complete registration for delegated tax refund per client | Retain registration form |
| Tax refund application | Submit refund declaration form; retain supporting invoices | STA No. 26 (2022); invoices retained, not submitted |
| Subsequent amendments | Update internal records within 30 days of change | No need for resubmission |
| During tax inspection | Provide contracts, invoices, registration forms, and risk control records | Failure may be deemed unregistered or non-compliant |
IV. Compliance Risks and Practical Recommendations #
- Establish a Client Risk Rating and Verification System
Implement a due diligence process including credit scoring, trade background checks, and logical validation of transaction documents. - Develop an Auditable Risk Control Information System
Digitally track the full refund workflow, ensuring traceable audit trails for all key staff and procedural nodes. - Standardize Service Contracts
Clearly define roles and responsibilities for tax refund filing, authenticity representations, and default liability clauses. - Conduct Internal Training and Mock Audit Drills Regularly
Improve staff capacity to respond to evolving tax rules and enforcement practices. - Cooperate Proactively with Tax Authorities
Maintain a high tax credit rating and good standing to secure long-term eligibility for refund facilitation policies.
V. Conclusion: From Declaration Agent to Compliance Co-Responsible Party #
CFTSPs are no longer perceived merely as technical service providers. In the eyes of tax authorities, they serve as co-responsible parties in ensuring the authenticity and compliance of export refund filings. As tax administration shifts from document completeness to behavior-based compliance and from upfront control to ex-post accountability, CFTSPs must establish robust internal compliance systems, raise compliance awareness, and strengthen governance mechanisms in order to operate sustainably and minimize risk.
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