China’s VAT Export Rebate Phase-Out for Primary Polysiloxanes (HS 39100000)

Starting April 1, 2026

A Catalyst for High-Value Industrial Transformation

The Ministry of Finance and the State Taxation Administration have jointly issued the Announcement on Adjusting Export Rebate Policies for Photovoltaic and Other Products. This policy definitively announces the discontinuation of the 13% value-added tax (VAT) export rebate for Primary Polysiloxanes (HS 39100000), effective April 1, 2026. The policy will be implemented based on the export date indicated on customs declaration forms, meaning products exported on or after April 1, 2026, will no longer qualify for VAT export rebates, marking a pivotal step in optimizing China’s export rebate system.

Policy Background: Guiding Industrial Upgrades, Reducing Reliance on Low-Value Exports

Primary polysiloxanes, the foundational cornerstone of the organosilicon industry, constitute fundamental raw materials for manufacturing silicon rubber, silicone oils, and numerous advanced products. They find extensive application across vital sectors including photovoltaics, electronics, construction, and automotive. As the world's largest producer and exporter of organosilicon, China sees its primary polysiloxanes commanding a dominant position within global export markets.

This policy adjustment reflects the government’s structural optimization of export rebates, aiming to reduce reliance on low-value-added exports and incentivize firms to shift toward high-tech, high-value-added production. A spokesperson from the tax authority stated, “The move will encourage enterprises to focus on high-end innovation, elevate China’s position in global industrial chains, and align with carbon neutrality goals and high-quality development.”

Implementation Details: Precise Scope, Clear Timeline

Pre-April 1, 2026: Primary polysiloxanes declared for export before this date will remain eligible for the 13% VAT rebate under existing policies.

On/After April 1, 2026: Products exported on or after this date will no longer receive rebates, requiring exporters to pay full VAT on export transactions.

Product Scope: The policy specifically targets unprocessed primary polysiloxanes (HS 39100000).  Further-processed downstream products(e.g., silicone-based coatings, silicone modified oil, composites) remain unaffected unless specified in future amendments.

Industry Impact: Short-Term Pain, Long-Term Gain

Short-Term Challenges

The elimination of rebates will heighten export costs. At prevailing market prices, exporters grapple with a substantial surge in expenses, drastically compressing their profit margins. Small and medium-sized enterprises (SMEs), reliant on price competition, face the peril of losing orders and surrendering valuable international market share. Price-sensitive buyers in India and Southeast Asia may readily seek alternative suppliers, threatening China's hard-won global export share.

Long-Term Strategic Gains

The policy will accelerate industry consolidation and spur technological advancement. Leading firms can mitigate impacts by pioneering high-purity or specialty polysiloxanes (e.g., medical-grade, electronic-grade) or by tapping into burgeoning domestic markets within emerging sectors like new energy and semiconductors. SMEs must accelerate transformation initiatives or risk being phased out. Alternatively, strategically relocating production to RCEP nations (e.g., Vietnam) could cultivate vital regional strongholds for Chinese enterprises.

Corporate Strategies: Diversification and Core Competitiveness

Technological Innovation: Increase R&D investment to develop cutting-edge, high-value products and enhance pricing power.  

Market Diversification: Target domestic high-tech sectors while leveraging RCEP preferential tariffs to expand market share across Southeast Asia.  

Supply Chain Optimization: Strategically establish overseas production bases or partner with local firms to bypass trade barriers and stabilize global market presence.

Outlook

The policy marks a turning point for China’s organosilicon sector, accelerating its evolution from a volume-driven exporter to a value-centric innovator. While short-term pain is inevitable, firms that embrace innovation, diversify markets, and adopt sustainable practices will dominate the next phase of global trade.