|
Q：
|
What is the ‘cost of foreign exchange’?
|
|
A：
|
The cost of foreign exchange means the amount in RMB invested to obtain 1 US dollar. It is an important index to measure whether an export project is profitable or not.
|
Q：
|
How to calculate the cost of foreign exchange?
|
A：
|
The formula to calculate the cost of foreign exchange is as follow:
cost of foreign exchange
|
= domestic purchase cost / FOB price in USD
|
|
= purchase invoice amount excluding VAT*(1+VAT rate – tax refund rate)/FOB price in USD
|
|
Q：
|
What is the purpose of calculating the cost of foreign exchange?
|
A：
|
The simple explanation is that the cost of foreign exchange refers to the total cost of RMB in order to exchange for one dollar, and its benchmark is the prevailing rate of USDCNY. It reflects an export project is a gain or a loss, and it is an important index of if an export enterprise’s economic performance. Assuming the prevailing rate of USDCNY is 7, if the cost of foreign exchange of one export project is 5, it means the enterprise exchanges USD 1 (which is worth RMB 7) by RMB 5, then it is a gain; if the cost of foreign exchange of one export project is 8, is means the enterprise exchanges USD 1 (which is worth RMB 7) by RMB 8, then it is a loss.
|
Q：
|
What is the reasonable range of cost of foreign exchange?
|
A：
|
The benchmark of the cost of foreign exchange is the prevailing exchange rate of USD against CNY. As a result, if the cost of foreign exchange is higher than the prevailing rate, the export is in a loss; otherwise the export is profitable. At present, the reasonable range of cost of foreign exchange in the export tax refund system is 5-8, lower than 5 or higher than 8 will trigger the warning. If the cost of foreign exchange is too high, it may cause higher tax risks.
|
Q：
|
What should the foreign trade enterprise do if a warning related to the cost of foreign exchange incur when applying for export rebate? Will the warning affect tax refund?
|
A：
|
It is only a doubtful point which needs to verify if the cost of foreign exchange is out of reasonable range, while not a judgmental criterion of tax refund applicability. If such a warning emerges when applying for export rebate, the enterprise needs to submit a written statement based on the actual situation explaining the reason why the cost of foreign exchange is too high or too low. Normally it will not affect the refund. But the enterprise should be aware that it must be assured the export business is true and real, and there are sufficient documents to support the business.
|
FAQ
