In order to accelerate the integration of the PV industry, follow the announcement of the standard condition regarding PV industry, Ministry of Finance of the People’s Republic of China and State Administration of Taxation further announces that PV manufacturers will be refunded 50% of the value-added tax (VAT) from October 1st. Some analysts believe that it will help elevate PV plant projects' rate of ROI by 1%-2%.
The announcement indicates that the 50% refund on the VAT is to encourage the use of solar energy and to promote the development within PV industry. The policy will be valid from October 1st 2013 to December 31st 2015. In addition, indicated by the data quoted by mainland media, current VAT rate is 17% for PV power plant owners. Projected based on the analyses, deducting the tax rate into half means revising 8.5 percentage points of VAT downward. It’s also equivalent to an increase FiT of RMB0.2 –RMB0.4/kWh, which means that power plants will be able to increase profit margins by 1%-2%. Some manufacturers believed that the policy will benefit downstream PV manufacturers while promoting upstream businesses.
The market has been waiting for the 50% refund on the VAT to happen, which is because there were successful cases in the past where the VAT has been used to support other forms of energy. For example, the 50% refund on the VAT was implemented for electricity generated by wind energy in 2008. Not until the end of last year, the State Council of People’s Republic of China has started to propose the Preferential VAT toward PV power plants and the policy didn’t release until last week.
In fact, ever since the new EU-China agreement has been settled for PV industry this year, China’s PV policies have been released continuously. For example, China’s Development and Reform Commission has announced PV subsidy plans in the end of August while the amount of subsidy far exceeded the market projected. With China announcing PV integration plans in mid-October, they are hoping to get the industry recovered.