People's Bank of China, Ministry of Foreign Trade and Economic Cooperation and State Administration of Taxation, Handling of Loans Secured by Custodial Accounts for the Reimbursement of Taxes on Exports Circular

Issued: August 24 2001
Applicability: A "loan secured by a custodial account for the reimbursement of taxes on exports" means a short-term working capital loan provided by a commercial bank to an export enterprise, which is secured by the receivable export tax rebate of the enterprise (Item One).

Main contents: According to the Circular, enterprises with steady export business, good compliance record and sound financial system are eligible for loans secured by custodial accounts for the reimbursement of taxes on exports (Item Two). Such loans shall have a maximum term of one year and, in principle, not exceed 70% of the reimbursable taxes on exports receivable by the borrower (Item Three). Commercial banks shall exercise their discretion in advancing such loans which are regarded as commercial loans, and shall procure an agreement from the borrower that the account for the reimbursement of taxes on exports of the borrower shall be controlled by the lender as long as any amount of the loan is still outstanding (Item Four). The Circular requests tax departments to cooperate with commercial banks in such lending business without providing any form of security and ensure that no transfer is made out of the account for the reimbursement of taxes on exports of any borrower without the consent of the lending bank (Item Five).
Foreign trade departments are also requested to promptly update commercial banks on policies concerning the reimbursement of taxes on exports and the creditworthiness of export enterprises (Item Six).
Related legislation: PRC, Commercial Banking Law, May 10 1995, CLP 1995 No.5 p32 and Lending General Provisions, Aug 1 1996, CLP 1996 No.8 p4