China’s Instant Tax Refund at Purchase: Impact on business
On 8 April 2025, China’s State Taxation Administration officially launched the nationwide rollout of its “Instant Tax Refund At Purchase” service for foreign visitors. This policy shifts from the traditional refund-upon-departure model to a more efficient refund-at-point-of-sale system.
Background: From Traditional to Instant Refund
China’s Departure Tax Refund (DTR) policy, introduced in 2015, allows overseas travelers to apply for a refund of VAT upon leaving the country. However, this process was marred by long waiting times and cumbersome procedures.
The new Instant Tax Refund service allows eligible overseas travelers to receive their tax refunds (prepayments) on the spot at the time of purchase, with verification by Customs upon departure. If the traveler fails to leave as required, the prepaid amount will be recovered via credit card pre-authorization. This optimization significantly improves the convenience of tax refunds and stimulates the spending intentions of overseas visits.
How the Instant Tax Refund Works
- Eligibility: Foreign visitors must shop at certified tax-free retailers and meet minimum spending thresholds. The goods must not be consumed or used prior to leaving China.
- Refund Process: Upon purchase, tourists complete a credit card pre-authorization to receive the refund immediately. Customs verify the traveler’s identity and goods upon departure, lifting the pre-authorization once confirmed.
- Refund Rates: VAT refund rates vary based on the applicable VAT rate, typically ranging from 8% to 11%.
- Boost retail revenue
Instant tax refunds have reduced visitors’ shopping concerns and boosted the sales of high-value-per-unit goods (e.g., luxury goods, electronic products, jewelry, etc.).
Pilot data show that the average unit price of foreign visitors’ purchases increased by 20%-30% in stores offering Instant Tax Refund services.
- Drives Cross-Border Payment Development
Increased demand for credit card pre-authorization and cross-border settlements has prompted banks and third-party payment institutions to collaborate with tax refund agents. Alipay, WeChat, and UnionPay have accessed the Instant Tax Refund system to optimize the international payment experience.
- Enhancing Sino-Foreign Exchanges
Compared to mature tax refund markets such as Japan, South Korea, and Europe, China’s Instant Tax Refund system is more convenient, attracting high-spending visitors. Combined with the “Visa-Free Policy”, this will further promote the recovery of inbound visits.
Conclusion
The SAT will strengthen the interpretation and counseling of relevant policies, continue to upgrade and improve the system functions, optimize the tax refund handling process, and actively help attract foreign visitors to China, fully releasing the potential of inbound visit consumption.
China’s nationwide rollout of the instant tax refund at purchase service for foreign visitors represents a strategic move to enhance the country’s exchanges. By providing a more convenient and efficient VAT refund system, businesses can capitalize on increased consumer spending and enhance their competitiveness in the global market. As the policy continues to evolve, businesses should remain agile and adapt their strategies to maximize the opportunities presented by this innovative initiative.
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