Market Procurement 1039: VAT Exemption for Export, Legal Export Without Input Invoices

Business owners in Yiwu, who source goods for foreign trade from the International Trade City, Huangyuan Market, and Beixiazhu, often face this dilemma: goods are pieced together from various stalls in the market, making it impossible to gather all the value-added tax (VAT) special invoices. Wanting to export through regular channels and claim a refund? No way. Resorting to "buying documents for export"? That's too risky.

In fact, the state has long provided a dedicated legitimate path for Yiwu - Market Procurement Trade (Customs Supervision Code 1039): goods purchased within designated market clusters are exempt from VAT, do not require an export tax rebate, and can be legally exported without input invoices. Today, Jinfan Tax & Finance will help you understand the financial implications clearly.

I. What is 1039? Why Yiwu Business Owners Must Know It

Market Procurement Trade refers to a form of trade where qualified operators purchase goods within a market cluster area recognized by the state, with a single customs declaration valued at no more than 150,000 USD, and export these goods under the 'Market Procurement Trade' method. Yiwu was one of the first pilot cities nationwide in 2013 and is also the largest and most mature pilot project in the country. The Announcement of the State Administration of Taxation on the Exemption Management of Goods Exported Under the Market Procurement Trade Method (State Administration of Taxation Announcement No. 89 [2015]) clearly states that goods exported under the Market Procurement Trade method are exempt from VAT but do not qualify for export tax rebates.

To put it simply: tax-exempt, no tax rebate, and legal export without input invoices. This is a tailor-made channel for Yiwu business owners dealing in small commodities for foreign trade.

It Specifically Addresses the "Old Problems" of Yiwu's Small Commodity Exports

The typical characteristics of Yiwu's exports are "small orders, mixed goods, and a wide variety": a container may contain dozens of types of small commodities sourced from tens of stalls in the International Trade City and Huangyuan Market. Such goods naturally come with several challenges:

• Unable to meet the conditions for tax rebates - individual transaction amounts are small, and VAT special invoices cannot be fully obtained, making it impossible to go through the general trade rebate process;
• No invoice procurement is the norm - purchases in the market are mostly made in cash or via bank transfer, and invoices cannot be fully obtained;
• Previously, only the option of "buying documents for export" was available - freight forwarders would buy documents for customs clearance, which seemed convenient but was actually in a gray area, with any issues being borne entirely by the business owner.

1039 opens a legitimate door for this scenario: tax exemption at the place of purchase, no tax rebate, and no need for invoices, turning gray business into compliant business.

II. Let's Do the Math: How Much Can 1039 Save?

First, let's look at the core differences between the three export methods:

For example, a batch of goods worth CNY 5 million, consolidated for export from the International Trade City—

• Through general trade: Without a special invoice, no tax rebate can be claimed, and issues are likely to arise during the declaration process;
• Through 1039: VAT exempted, declared as tax-exempt, compliant export, and enjoys customs clearance convenience;
• Through buy-sell export: Although seemingly convenient, if discovered, it will be treated as tax evasion, resulting in back taxes + late fees + fines of 0.5 to 5 times the amount evaded, and may also involve criminal risks.

The calculation here is clear: 1039 is not about "how much money is saved," but rather about "whether legal export is possible." For small commodity trades without invoices, it is the most suitable legitimate path.

III. Who and What Goods Can Use 1039?

Not all exports can use 1039; several conditions must be met simultaneously:

• Subject Condition: Individual businesses, foreign trade companies, and other operators registered within the market cluster area, and have completed registration on the Market Procurement Trade Network Information Platform;
• Procurement Location Condition: Goods must be purchased within the recognized market cluster areas (such as Yiwu International Trade City, Huangyuan Market, etc.);
• Value Condition: The value of a single customs declaration form does not exceed USD 150,000;
• Declaration Condition: Declare the export to customs under the market procurement trade method (1039).

Note that goods prohibited or restricted from export by the state, high-value goods requiring export rebates, etc., are not applicable to the market procurement trade method.

IV. How to Operate Specifically? Five Steps to Completion

1. Entity Registration — Complete the registration of the business entity and goods on the Market Procurement Trade Network Information Platform;
2. Goods Consolidation — Purchase within the cluster area, consolidating a variety of small-batch goods into containers;
3. Customs Declaration for Export — Declare to customs using the 1039 supervision method, and export the goods;
4. Tax Exemption Filing — File for tax exemption with the tax authority, with VAT directly exempted;
5. Compliant Foreign Exchange Receipt — Receive foreign exchange through compliant bank channels, keeping contracts, customs declarations, and foreign exchange settlement documents.

Yiwu has mature comprehensive service platforms and agencies for market procurement trade. First-time operators can seek professional institutions to guide them through the process.

V. Four Pitfalls, Each Can Cause Major Troubles

• Packaging 'Buy Order Export' as 1039 — 1039 requires genuine purchases, genuine registrations, and genuine declarations. Bought orders without a real trade background are still illegal;
• Receiving Foreign Exchange in Personal Accounts or Using Underground Banks for Currency Exchange — Foreign exchange receipts must go through compliant bank channels. Large amounts received in personal accounts can easily be monitored by banks and tax authorities, involving risks of capital flight and money laundering;
• Splitting Orders Over 150,000 USD — Splitting customs declarations to avoid the value limit is considered false declaration of trade methods. If discovered, it will be dealt with severely;
• Falsely Issuing Invoices, False Registrations — Issuing fake VAT invoices to meet order requirements is a key target of tax audits, potentially leading to criminal liability.

VI. Q&A: 5 Questions Most Concerning to Business Owners

Q1: I am an individual business owner without import and export rights. Can I do 1039?
A: Yes. Individual business owners can export through a foreign trade company registered in the market cluster area, or they can directly declare after completing the relevant registrations. Many foreign trade companies in Yiwu offer 1039 agency services at a low cost.

Q2: What's the difference between 1039 and cross-border e-commerce 9610, 9710?
A: 1039 is Market Procurement Trade, targeting no-invoice consolidated container exports within the market; 9610 is Cross-border E-commerce Retail Export, targeting B2C small packages; 9710/9810 is cross-border e-commerce B2B export. The policies for these three channels are different, choose according to your business model, or use them in combination.

Q3: After using 1039, can I still apply for export tax rebates?
A: No. 1039 is 'VAT exempt, no rebate', which is a different path from the 'exempt, offset, and refund' of general trade. To get a rebate, you need to have input VAT special invoices and follow the general trade route. You can only choose one.

Q4: Is it okay if the customer pays to a private account?
A: It is not recommended and is also illegal. 1039 requires receiving foreign exchange through compliant bank channels. Payments to private accounts not only prevent you from making tax-exempt filings but also trigger abnormal monitoring by banks and tax authorities due to large and frequent private account receipts, posing high risks.

Q5: What if the value of goods exceeds 150,000 USD?
A: The excess amount cannot be split into separate orders; it should be declared for export through normal channels such as general trade. It is recommended to plan the declaration method before shipping to avoid discovering that the value exceeds the limit at the time of customs declaration.

VII. Sources and References

• Announcement of the State Administration of Taxation on Certain Issues Concerning the Exemption from VAT for Exported Goods under the Market Procurement Trade Method (SATO Announcement No. 89 [2015]) —— Exemption from VAT for exported goods under the market procurement trade method
• Provisional Regulations of the People's Republic of China on Value-Added Tax and its implementing rules —— Exemption policy applicable to exported goods under the market procurement trade method
• In 2013, eight departments including the Ministry of Commerce approved Yiwu as one of the first batch of pilot cities for the market procurement trade method nationwide
• In 2019, the State Council approved the Overall Plan for the Comprehensive Reform Pilot Zone of Yiwu International Trade —— Supporting Yiwu in deepening the reform of the market procurement trade method
• State Administration of Taxation official website: www.chinatax.gov.cn; Zhejiang Provincial Tax Service: zhejiang.chinatax.gov.cn

Jinfan Tax & Finance Says

Market procurement trade 1039 is an undervalued card in the hands of Yiwu business owners. For the same no-invoice export, choosing the right channel means tax exemption and compliance, while choosing the wrong channel carries the risk of tax evasion, the difference lies in a single decision.

Jinfan (Yiwu) Tax & Finance Management Co., Ltd. has been rooted in Yiwu for ten years, familiar with the entire process of record-filing, tax-exempt declaration, foreign exchange receipt, and accounting treatment for market procurement trade. If your export business is still revolving around "buying documents" or "private account foreign exchange receipts," or if you are new to 1039 and don't know where to start, feel free to come and talk to us. We will help you navigate the export path correctly and steadily.

📍 Jinfan (Yiwu) Tax & Finance Management Co., Ltd.
🌐 Official Website: jfcs.com.cn
🤝 Focused on tax and finance services for small and medium-sized enterprises in Yiwu for 10 years

This article is based on publicly released policy documents by the State Administration of Taxation, the Ministry of Commerce, and other official sources, and is for reference only. The specific application of policies shall be subject to the opinion of the competent tax authority.