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How to write a description of the situation where the cost of foreign exchange conversion for export tax rebates in Suzhou is lower than the reasonable lower limit
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Our company is a company located in Suzhou.Enterprise, please submit the declaration recentlyWhen the system prompts that the foreign exchange conversion cost is lower than the reasonable lower limit, the tax bureau requires us to provide a situation explanation. Could you please tell us how to write this explanation? What materials do we need to prepare? Will this affect our tax refund?
Daniel XuYears of service：10Customer Rating：5.0
Director of Import & Export OperationsStart a Chat
The foreign exchange conversion cost is lower than the reasonable threshold，usually because your FOB export price is too low compared to the purchase cost，and the system determines that there may be a risk of under-reporting revenue or artificially inflating input tax. When writing the situation explanation，you must focus on the two core principles of "authenticity" and "reasonableness". Firstly，the explanation should clearly list the calculation formula: Foreign exchange conversion cost = (VAT refund tax base × (1 + tax rate)) ÷ export FOB USD price. When this value is lower than 5 (the current reasonable threshold)，the system will issue a warning. Secondly，you must provide the following four types of supporting materials。
1. Proof of business authenticity: Export contracts，purchase contracts，invoices，and payment slips to form a complete chain of evidence。
2. Explanation of price reasonableness: If the low price is due to market competition，provide competitor quotes and client email correspondence，if it’s due to rising raw material prices，provide supplier price increase notifications。
3. Special circumstances explanation: If it’s a strategic action such as sample orders，inventory clearance，or market expansion，clearly state the business purpose。
4. Logistics documents: Bill of lading，customs declaration，and freight invoices to verify the FOB price composition。
Finally，pay attention to three compliance red lines。
- Never fabricate transactions。
- Never forge documents。
- Explanations must be verifiable。
It is recommended to use a "facts + data + conclusion" structure，with each statement supported by documentation. If it’s indeed a normal business operation but a system misjudgment，it usually won’t affect the tax refund，but the review period will be extended by 15-30 working days.
Jason WuYears of service：10Customer Rating：5.0
International Logistics & Supply Chain ManagerStart a Chat
From a logistics operation perspective, abnormal exchange rate costs often stem from issues with FOB price calculations and document matching. You need to immediately verify whether the FOB price on the customs declaration accurately reflects the value of the goods, and whether freight and insurance charges have been erroneously included in the value of the goods, leading to an inflated denominator. When writing the situation explanation, be sure to attach a detailed logistics cost breakdown table, clearly distinguishing between: goods cost, ocean freight, insurance, and miscellaneous fees. If the transaction uses the CIF clause, you need to convert it to FOB prices, and the conversion process should be detailed in the explanation. Practical recommendations:
1. Immediately contact the freight forwarder to obtain the full bill of lading and freight invoice to verify the freight amount;
2. Check the declaration elements on the customs declaration to ensure accurate filling of the "transaction method," "freight," and "insurance" columns;
3. For LCL cargo, provide a cost allocation certificate issued by the freight forwarder;
4. Add a "Logistics Cost Composition Explanation" section in the explanation, presenting the cost breakdown in a tabular format.
In terms of timing, the explanation must be submitted within 10 working days of the tax authority’s notification. Delayed submission may affect the tax refund process. For future declarations, it is recommended to simulate the exchange rate cost calculation using the system first and prepare explanatory materials for abnormal documents in advance to avoid being caught off guard.
Lucas LiuYears of service：8Customer Rating：5.0
Senior Operations ConsultantStart a Chat
When communicating with the tax bureau, attitude and rhetoric are crucial. The situation explanation should not be an admission of guilt, but a professional interpretation of business logic. Start by establishing a professional and credible image by stating: "Our business operations are legitimate and compliant. Below is our explanation of the situation."
For the main body, we recommend a "three-part argument":
1. Explain the business context, e.g., "To expand into Southeast Asia, our company conducted three batches of trial orders with Indonesian clients in 2024, adopting a competitive pricing strategy with a profit margin controlled within 3%." This rationalizes the low-price strategy and demonstrates strategic intent.
2. Support with data: Prepare a "cost-profit analysis table" to clearly show procurement costs, tax refund amounts, FOB prices, and actual profit margins. Emphasize that even with low exchange rate costs, the profit margins remain reasonable, ruling out tax evasion motives.
3. Provide supporting evidence: Proactively mention: "Related transaction records, email exchanges, and client qualification documents have been organized for review." This demonstrates cooperation.
Key rhetoric: Avoid vague terms like "may" or "probably"; use more definitive expressions like "after verification" or "evidence shows." Conclude with: "We sincerely request your review. If you have any questions, we are ready to provide additional materials at any time." This shows respect while maintaining initiative. Remember, the tax bureau seeks assurance. The more professional and transparent your explanation, the faster it will be approved.