My company is located in Russia. We import cotton from China.
The problem is that we pay the price for the yarn on the terms of FOB-NINGBO with the VAT included into the price. Our supplier is filing for the VAT refund but doesn’t want to give us the discount for the VAT.
Is it appropriate to insist on the VAT discount?
Could you recommend a company to help me as an agent in China and Exporting company?
Under FOB terms, the supplier is responsible for paying the VAT tax up front and collecting any VAT rebate at export. In other words, the supplier has already calculated the VAT situation into FOB price quoted to you. Under FOB terms, it is not the norm in China for the supplier to refund the VAT to the buyer, unless you have made special arrangements in advance. Such special arrangement should only be made in cases where the two sides have a lot of trust and experience working together.
Furthermore, because it is very easy for the supplier to distort how VAT effects the final price, in your case below, you would be wise to focus on negotiating the final FOB price rather than basing your negotiation on the VAT rebate.
For example, supplier could say something like “the VAT Rebate is 11%, and supplier will give the buyer 7% of the 11%.” Sounds great. But if that supplier has a special relationship with the tax bureau, they may be getting the full 17% back and keeping the 17-7, which is a lot different than 11-7. Unless you are well versed in the VAT system, you would have a hard time finding out what really happens.
To make a long story short, focus on the FOB price and let the supplier worry about the VAT. If you were buying ExW or consolidating orders at a central point in China before shipping, then VAT becomes a bigger issue.
You also asked if I could recommend a company to help you as an agent in China and Exporting company.
If it turns out VAT is an essential part of your negotiation for some reason, know that CSIC sponsor PassageMaker (www.PSSchina.com) can conduct a VAT survey and offer advice (http://psschina.com/about/virtual-tour/auxiliary-services/value-added-tax-planning/) . PassageMaker also has an import-export registration and VAT license so they can conduct transactions on behalf of the clients who want total transparency.
Also, if you are not happy with your current supplier, there are agents who can assist with finding and managing vendors. The CSIC keeps a list of reputable 3rd parties open to the public at http://chinasourcinginfo.org/endorsed-service-providers/
On a final note, if you wanted to set up your own office in China to process the VAT in-house, you may want to take a look at www.Fiducia-China.com .