China cancels export VAT refund for solar related products

Why the changes matter

The impact extends beyond Chinese exporters. Losing a VAT refund can reduce a supplier’s margin on an existing order and prompt a request for a higher price. Whether that cost reaches the overseas buyer depends on the contract terms and the negotiations that follow.

For international businesses, the changes can therefore affect both purchasing costs and the profitability of existing commitments. Buyers that have already agreed resale prices may have limited room to pass on an increase, making the withdrawal relevant further along the supply chain.

How the export refund rules have changed

China has scrapped export VAT refunds for 249 listed products, including solar products, selected chemicals, ceramics and glass. The changes took effect on 01 April 2026 under Announcement No. 2 of 2026. Businesses should check the listed customs codes and product descriptions to determine whether their exports are affected.

The refund rate for 22 listed battery products fell from 9% to 6%, but that reduced rate lasts only until 31 December 2026. From 01 January 2027, refunds for these products will disappear entirely.

A cancelled refund does not, however, translate automatically into an equivalent increase in cost. Under China’s 2026 export VAT rules, goods for which export refunds have been cancelled are generally subject to VAT taxation, with eligible input VAT available for deduction. The actual impact therefore depends on the exporter’s VAT position and cost structure, rather than simply on the former refund rate.

What does this look like in practice?

Consider a hypothetical battery order agreed in September 2026, with one shipment exported in December and another in January. Assuming the goods qualify, the December shipment attracts the 6% refund rate, while the January shipment does not.

If the December shipment slips into January, the same order can carry a different tax cost. Under a fixed-price contract, the exporter may have to absorb that cost unless the terms allow an adjustment. A buyer facing a proposed increase should ask for the calculation and check how the contract allocates the change.

Before year-end shipments, tax, sales and procurement teams should agree how timing affects price. Bringing exports forward may preserve the refund, but the benefit should be weighed against freight, financing and storage costs. Clear agreement on who bears the tax impact of a delay can help prevent a customs date becoming a commercial dispute.

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As a partner at MSA, Brian Blömer leads the corporate services division. Providing guidance to enterprises navigating the Chinese market, Brian's expertise spans various areas of service, including facilitating market entry, company establishment, corporate structuring, and managing company liquidations.