Export tax rebate is an important aspect of optimizing the management of foreign trade. With the promotion of information sharing system and mechanism among tax, banking, customs and foreign exchange management departments as well as the establishment of tax big data, the tax department has become more powerful in supervising the trade behavior of export tax rebate. However, as some export enterprises have short-term financial difficulties and pledge their export tax refund account trusteeship for loans, can the court seize the special account and withhold tax refunds to enforce the relevant judgment when the enterprise has economic disputes with other subjects? When the enterprise owes tax due to economic activities, what is the priority of the bank's right to be compensated and the priority of the tax in the first place? These issues need to be clarified in order to balance the interests of all stakeholders.

I. Can the court preserve or enforce the enterprise's unrefunded taxes?

(I) has been applied for and not refunded taxes without legal procedures to determine, not for foreign trade enterprises all

Export tax rebate is a measure to return part or all of the domestic tax that has been levied on export commodities to the exporter. According to Article 3 of the Law on Administration of Tax Collection, export tax refund shall be carried out in accordance with the provisions of laws and administrative regulations. According to Article 16 of the Administrative Measures for Tax Refund (Exemption) for Export Goods (for Trial Implementation), an enterprise, after examination and approval by the state tax authorities, has to go through a specific procedure of refund through the bank (State Treasury) before it can obtain the export tax refund. In order to prevent the state's export tax rebates from being lost due to enterprises that do not meet the qualifications for export tax rebates evading payment or fraudulently obtaining export tax rebates, the tax authorities may suspend tax refunds or withhold export tax rebates when they believe that there are doubtful matters to be verified in the tax refund declarations of the taxpayers. When the taxpayer has a dispute with the tax authorities, he must first seek relief through administrative reconsideration and administrative litigation according to the law. It can be seen that the tax authorities have not been examined and approved by the refundable tax refund uncertainty, is only a kind of future enterprise can be expected to benefit, not yet belong to all the property of the enterprise. Therefore, the enterprise and other subjects of economic disputes, its refundable tax refund should not be the subject of court preservation or enforcement. Even if the export tax refund has arrived, the money has been seized and frozen, the court shall not repeat the seizure and freezing. And if there is already a guarantee on the amount, it is also necessary to confirm the priority of each relevant party.

(II) Priority right of the lending bank to the tax refunds in the special account for export tax refunds

First of all, what kind of guarantee does the lending bank which accepts the trusteeship of the special account enjoy for the tax refund in the special account?

For one thing, the pledge of refundable tax is not a movable property pledge. According to Article 425 of the Civil Code, if the debtor or a third party pledges its movable assets to the creditor for possession, and the debtor fails to perform the due debts or the circumstances agreed by the parties to realize the pledge occur, the creditor has the right to be paid in priority for the movable assets. Although Article 1 of the Provisions of the Supreme People's Court on Issues Related to the Trial of Export Tax Refund Escrow Account Pledge Loan Cases (Legal Interpretation [2004] No. 18) treats the special account for export tax refunds as the subject matter of the pledge, what is of value is the refunded amount in the account rather than the account itself, and the special account for export tax refunds is only specific to the refunded amount of export taxes, which enables the lending bank to accept the trusteeship and to control the special account in actuality. that guards against lending risks. However, even the export tax refunds, i.e., money, which have arrived in the account, are special kinds of things, whose ownership is transferred with the transfer of possession, and the bank obtains the ownership of the export tax refunds by taking possession of them. The refundable amount is only an expectable benefit, which is not a movable property, and it is more inappropriate to set up a movable property pledge on it.

Secondly, for the refundable amount, it does not belong to the accounts receivable in the pledge of rights. According to the provisions of Article 4 of the Measures for Registration of Pledge of Accounts Receivable, accounts receivable refers to the right of the right holder to demand payment from the obligor because of the provision of certain goods, services or facilities, including existing and future monetary claims and the proceeds arising therefrom. However, the tax authority is not the object of the provision of goods, services or facilities by the right holder, nor is it the obligor of the payment of the transaction, and the export tax rebate is generated on the basis of the state's measures to encourage exports, not on the goods, services or facilities provided by the right holder.

Thirdly, the lending bank accepting the trusteeship of the special account enjoys the right of priority compensation in respect of the tax rebates in the account. Legal interpretation [2004] No. 18 provisions of Article 3 has clearly pointed out that the export tax rebate special account pledge loan bank, the pledge account within the tax rebate enjoys the right of priority. The people's court hearing and implementation of the case, shall not have been pledged to the export tax rebate special account in the money to take property preservation measures or enforcement measures. From this provision, it is clear that the pledged special account is excluded from the court's preservation and execution. Although this provision has lapsed, as long as the escrow loan of the export tax refund account complies with the pledge provisions, the bank has the right of priority compensation for the tax refund in the account. Moreover, according to Article 70 of the Interpretation of the Supreme People's Court on the Application of the Civil Code of the People's Republic of China Concerning the Guarantee System, even if the escrow loan of the special account for export tax rebates does not constitute a pledge, the special account for export tax rebates is similar in nature to the "security deposit account", which can be regarded as an atypical guarantee. Accordingly, the lending bank accepting the escrow of the special account may also claim a right of first refusal in respect of the tax refund in the account.

II. How is the priority of the special account for export tax refunds determined?

(I) Whether the export tax refund can be directly offset against the tax arrears incurred by the enterprise?

According to the provisions of the Circular of the State Administration of Taxation on Relevant Issues Concerning Refundable Taxes Offsetting Owed Taxes (hereinafter referred to as the "Circular"), China has already established the first article that the refundable taxes that can be offset are the following taxes collected after May 1, 2001 and have been confirmed to be refundable: (i) the tax reductions and exemptions (including the "first levy and then refund") refundable taxes; (ii) the tax prepayment in accordance with the law to form the remittance and settlement of refundable taxes; (iii) the erroneous collection of refundable taxes, late fees, fines and confiscation of illegal income (referred to as forfeitures, hereinafter referred to as the same); (iv) the other refundable taxes, late fees and forfeitures; and (v) the erroneous collection of refundable interest on the other refundable taxes. Export tax rebate is essentially the refundable tax for enterprises to return the VAT paid in advance in China according to the national tax policy. Combined with the provisions of Administrative Measures for Refund (Exemption) of Taxes on Exported Goods (for Trial Implementation), the "refundable taxes that can be deducted" in the Circular shall include the export tax refund. From the viewpoint of legal relationship, both export tax refund and tax arrears belong to tax debt relationship, and the offsetting of enterprise tax arrears by export tax refund constitutes a legal debt offset if both export tax refund and tax arrears fulfillment period expire.

(II) Subordination of Tax Claims and Bank Guarantee Claims

However, when the enterprise has both export tax rebate special account escrow bank loans, and due to economic activities arising from the unpaid taxes, there is a conflict between the tax claims and secured claims in order of priority and whether the tax authorities can claim the debt offset problem. In this regard, should be differentiated between the normal business stage and enterprise bankruptcy and liquidation to be analyzed.

1、Normal Operation Stage

In the normal business stage, the enterprise's capital flow is normal, including tax claims, including the claims for the settlement of the subordination of the provisions of Article 45 of the Tax Collection and Administration Law. That is to say, tax claims have priority over unsecured claims. If the tax owed by the taxpayer occurs before the taxpayer has set up mortgage or pledge on its property or the taxpayer's property has been liened, the tax claims shall be enforced before the mortgage, pledge or lien. The tax obligation is established in accordance with the law, after which the period of tax declaration and the period of tax payment shall be calculated in turn, and the point of time when the tax claim arises shall be recognized by the date of expiry of the period of tax payment, and then the order of settlement of the tax claim and the bank pledge shall be arrived at by comparing with the time of the establishment of the bank pledge.

If the enterprise owes tax occurs before the enterprise establishes the export tax refund pledge, the tax authority may, on the date of expiration of the period of ordering the payment of tax, claim the debt set-off and offset the tax owed by the enterprise with the refundable export tax refunds due to the priority of the tax claim over the secured claim established later. If the enterprise owes tax occurs in the enterprise after the establishment of export tax refund pledge, due to the tax owed to pay off the subordinate inferior to the first established security claims, the tax authorities can not directly claim debt set-off, must first export tax refunds to return, to protect the bank pledge priority compensation. Of course, the tax authorities in the bank before the payment of the pledge, can still be export tax refunds of enterprises other than property to take tax preservation or enforcement measures.

2、Subordination of liquidation in bankruptcy and liquidation

In the bankruptcy liquidation link, the enterprise faces the plight of insolvency or obvious lack of solvency. The property of the enterprise is not enough to settle all debts, the confirmation of the liquidation is crucial, the bankrupt has no property for distribution, the bankruptcy procedure is finished, the enterprise is terminated, in the absence of guarantor and other joint and several debtors, the creditors' unliquidated claims are annihilated. Therefore, more attention is paid to the protection of creditors' interests in the bankruptcy liquidation segment. Moreover, compared to the Tax Collection and Administration Law, the Enterprise Bankruptcy Law specifically provides for the subordination of tax payments in bankruptcy, which is a special law, and according to the fact that special laws precede general laws, the confirmation of the subordination of payments in the bankruptcy liquidation process should also apply to the Enterprise Bankruptcy Law.

(1) How a bank can exercise the right of aliasing of a pledge of rights

In the Enterprise Bankruptcy Law, the property in which the security right has been set does not belong to the bankruptcy property and does not need to enter into the bankruptcy procedure for distribution, and the secured creditor enjoys the right of aliasing, and can be compensated in priority. As to how the pledge of export tax rebate rights can realize "exclusion", two different situations are distinguished. For example, before the acceptance of bankruptcy liquidation, the tax authorities have not yet transferred the export tax refund to the export tax refund account, the bank can claim the right of exclusion on the export tax refund right of the enterprise; for the acceptance of bankruptcy before the tax authorities have already transferred the export tax refund to the export tax refund account, belongs to the elimination of the right of export tax refund, and the tax refund money constitutes a specific object due to the transfer to a specific account, the bank can exercise the right of subrogation on the object, claiming the right of exclusion on the export tax refund money. The bank can exercise the right of subrogation in rem and claim the right of exclusion on the export tax refund.

(2) Subordination between the bankruptcy right of set-off of the tax authority and the bank's right of exclusion

The Enterprise Bankruptcy Law has clear provisions on the right of set-off in bankruptcy. According to Article 40 of the Enterprise Bankruptcy Law, a creditor who is indebted to the debtor before the acceptance of the bankruptcy application may claim set-off from the administrator. However, no set-off shall be allowed in any of the following circumstances: (a) the debtor of the debtor acquires the claims of others against the debtor after the bankruptcy application is accepted ....... That is, the bankruptcy right of set-off of the liquidation of the right of the downstream is also related to the time of the occurrence of the claim, it can be seen that the tax arrears occurred in the bankruptcy admissibility of any creditor can be on the tax authorities to exercise the right of set-off to put forward a defense; tax arrears occurred in the bankruptcy application admissibility of the tax authorities claimed tax arrears with the export tax rebate offset does not affect the ordinary creditors, but if the enterprise and the right of export tax rebate pledge, the exercise of the right of set-off will obviously infringe on the banks However, if the enterprise pledges the export tax refund right, the exercise of the right of set-off will obviously infringe the pledge right of the bank, and whether the tax authority can directly claim the right of set-off depends on the priority level of the right of set-off and the right of exclusion. There is no special provision in the Enterprise Bankruptcy Law on this issue, and the provisions of the Tax Collection and Management Law should be applied, i.e., comparing the relationship between the time of tax arrears and the time of establishment of the pledge right. If the time of tax arrears occurs before the establishment of the pledge right, the bank's right to exclude is inferior to the tax authority's bankruptcy right of set-off; if the time of tax arrears occurs after the establishment of the pledge right, it should be prioritized to protect the interests of the pledgee. The tax authority cannot directly offset the tax debts with the refundable tax, but must claim the right in accordance with the bankruptcy liquidation.

For the tax authorities to exercise the bankruptcy right of set-off, still failed to pay off the tax arrears, should be in accordance with the provisions of Article 113 of the Enterprise Bankruptcy Law, the remaining tax arrears into the second liquidation. At this time, because of the export tax rebate industry has been fully offset the tax arrears, the bank pledge lost, can only claim ordinary bankruptcy claims, that is, in the third liquidation in order to be paid. It should be noted that if the tax arrears is due to the enterprise export tax rebate non-compliance, the tax authorities to the enterprise to recover the export tax rebate, the liquidation should be different. In this case, the enterprise's right to export tax rebate itself is not established, and the pledge of rights established on this basis cannot be established. The bank can only claim an ordinary bankruptcy claim against the enterprise on the basis of the effective pledge contract.

III. What can export tax rebate stakeholders do to prevent risks?

(I) Foreign Trade Enterprises: Ensure Compliance and Tax Refund

As far as foreign trade enterprises are concerned, the first prerequisite for avoiding tax-related risks is to file and register in accordance with the law and fulfill the formalities of tax refund (exemption) for exported goods. The important initiative is to strictly abide by the real transaction to ensure compliant operation. In procurement, transportation, obtaining invoices and other aspects of strict verification of goods, funds, bills and other documents in line with the statutory requirements. At the same time, foreign trade enterprises may establish internal risk internal control mechanisms internally to ensure that the export business is real and legal and the procedures are compliant, so as to prevent the invoices obtained from being classified as abnormal vouchers, which will lead to the inability to apply for export tax rebates and losses. For the tax authorities do not have sufficient evidence to prove that the export business is false, but the suspension and withholding of export tax refunds for a long time, foreign trade enterprises should actively provide evidence to prove that the export business is real, state to the tax authorities that their transactions comply with the requirements for export tax refunds, and still disputes, foreign trade enterprises can take administrative reconsideration, administrative litigation, and other means to safeguard their legitimate rights and interests.

(II) Bank pledgee: strengthening account supervision and guaranteeing the security of claims

Loan bank is accepted the export tax rebate account trusteeship pledgee, in order to effectively prevent the loan risk, should focus on the account supervision. In accordance with the three ministries and commissions "on the export tax rebate account trustee loan business notice" article 4, article 5 of the provisions of the first since the date of the bank issued the loan to the date of the loan is fully settled, the loan bank to monitor the account should obtain the consent of the borrower. It is also agreed that "the borrower shall not transfer the money in the account without the consent of the lender". In addition, the bank must pay attention to audit the borrower's export tax rebate qualification, export tax rebate compliance, as well as the establishment of the pledge before the borrower whether the tax arrears, if there are relevant circumstances, the need for the borrower to provide additional guarantees or assurances, and agreed that the borrower due to the violation of the commitment, was found to be fraudulent export tax refunds and other circumstances that lead to the failure to obtain the rebate of the tax responsibility. Secondly, in cooperation with the tax authorities, we should ensure the uniqueness of the export tax refund special account of the foreign trade enterprises of the loan, and guarantee that the tax refund will be refunded into the special account, and shall not be transferred; before the full repayment of the trustee loan of the export tax refund account, without the consent of the lending bank, we shall not apply for the transfer of the special account of the export tax refund for the export enterprises.

(III) Tax Authorities: Cooperate with All Parties and Improve the Efficiency of Law Enforcement

On the one hand, the tax authorities shall cooperate with the loan work carried out by the lending bank and shall not require it to provide any form of guarantee to safeguard the security of the loan. For the economic disputes between enterprises and other subjects, the court requires to seize or execute the tax refund due to the enterprises, the tax authorities can refer to the Reply of the Supreme People's Court on Whether the Tax Authorities Have the Obligation to Assist the People's Court in Directly Allocating Tax Refunds (FaFu [1996] No. 11) to provide the court with the enterprise's account of tax refunds in the bank, the amount of tax refunds, and time of refunding the tax, and the court shall then Accordingly, the court shall notify the relevant bank to freeze or transfer the amount to be executed, but the tax authority cannot directly transfer the tax refund due to the executed person.

On the other hand, in the case that the tax authority suspends or withholds the export tax refund due to the doubtful authenticity of the transaction caused by the upstream supplier enterprise or its own reasons, the tax authority shall verify the transaction within a reasonable period of time, and if it fails to provide evidence to the contrary beyond a reasonable period of time to deny the authenticity of the export business, it shall lift the suspension or withholding status in a timely manner, and shall handle the export tax refund in accordance with the law.

IV. Summary

The export tax rebate is both the repayment guarantee of the escrow loan and the refundable tax against the tax owed by the enterprise, and the tax rebate payment that has arrived is also the property that can be enforced by the court, which involves the interests of many parties. But fundamentally, the need for enterprises to obtain export tax rebates in accordance with the law. For this reason, foreign trade enterprises should implement tax compliance in the whole chain of business to prevent tax risks and avoid failing to obtain export tax refunds. In addition, the lending bank that accepts the trusteeship of the special account enjoys the right of priority compensation for the tax refunds in the account, and in the bankruptcy liquidation link, this bank priority is paid before the tax priority.