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VAT taxes paid on Incoterms CIF or DDP

If we buy from a China supplier and deliver to our manufacturer in China with CIF or DDP terms, are we the buyer obligated to pay VAT tax on the product we purchased?

The short answer is that in the typical buy-sell transaction, the seller is responsible for paying the VAT. The VAT rebate on the other hand is applied for by the party that exports the goods out of China.

In order to pay VAT in the first place and/or process VAT rebate on the outbound you would need to be a fully licensed legal entity in China.

I called it the “short answer” because the situation can be a bit different if one of the parties involved is in an export processing zone and/or has some special tax status in China.

I hope these notes help. If there are follow up questions, please feel free to ask. If you would like to engage 3rd party support to consult and research your particular case, you may find it of value to visit the endorsed service providers at www.ChinaSourcingInfo.org




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