Important Notice Regarding the Refunded Import Purchase VAT
According to the latter part of Article 15, Paragraph 2 of the Value-Added and Non-Value-Added Business Tax Act (hereinafter referred to as the “Business Tax Act”), any business tax amount recovered by a business entity due to returned purchases or allowances shall be deducted from the input tax for the period in which such returned purchases or allowances occur.
The business tax levied by customs on imported goods is also considered deductible input tax. A business entity may lawfully declare and offset this amount against output tax. However, if the business entity later receives a refund from customs for overpaid business tax on imported goods, such a refund is deemed a reduction of input tax. This is analogous in nature to the business tax recovered due to returned purchases or allowances.
Therefore, starting from March 2003, if a business entity has already used the customs tax payment certificate to declare and deduct the output tax, and subsequently receives a refund from customs for overpaid business tax on imports, it must prepare a “Declaration Form for Refund of Overpaid Business Tax by Customs” (to be printed and provided by each local tax office for use by business entities). This form must be used to deduct the refunded amount from the input tax of the period (month) in which the refund occurs.
If a business entity fails to declare the above-mentioned refund, it shall be penalized in accordance with Subparagraph 5, Article 51 of the Business Tax Act.
The “Declaration Form for Refund of Overpaid Business Tax by Customs” shall be filed based on the period (month) in which the customs refund was granted. The form should differentiate between “Purchases and Expenses” and “Fixed Assets,” and the amounts should be entered into the appropriate columns for “Returns and Allowances” (field codes 40, 41 or 42, 43) in the business entity’s Sales and Tax Return (Forms 401 or 403).
