Import in China : Duties and taxes, the ultimate guide
Note: This article concerns only customs duties and taxes Applied on the Chinese Territory.
Throughout the year of 2018, the Chinese government enacted a ranging of new regulations which is intended to companies importing & exporting taxable goods and services from and towards China. These regulations exist in diverse ways and work depending on the products.
Here below an overview of taxes in which compagnies must face when they export or-and import from/towards China.
For each exportation/importation, companies are exposed to taxes such as:
1 – Value added tax (VAT)
2 – Consumer law
3 – Customs Duty
Consumption tax on imported goods
Any goods imported in China are submitted to a VAT of 13% or 17%.
The tax of 13% concerns only a specific category of good from the agriculture sector, and on a certain kind of utilitarian objects. For other goods, it is a tax of 17 % which will be applied.
The input VAT (sale x VAT rate) is the amount of the VAT paid when a taxable product or a service is bought and, could be deductible a TVA downstream. Furthermore, it is the VAT amount of taxable goods or services submitted to the buyer by the seller.
Chinese consumption tax (CT) is Applied on companies and organizations which produce and import: Taxable products, taxable products under the figure of consignment or taxable sales products.
All products regarded as toxic to human health like: The tobacco, Alcohol, luxury goods (jewels, cosmetics) and top range products (cars and motorbikes) are taxable imported products to the consumption tax in China.
For imported goods, consumption tax can depend on the type of product. Tax calculation can be done either based on « ad valorem » or on quantity.
Custom duties in China
Customs duties include importation and exportation taxes which represents 8 294 objects subject to a charge according to the customs tariff plan 2017/2018. Customs duties are calculated either on the basis of « ad valorem » or on quantity.
Customs duties applicable for importations of goods are divided in several categories:
- Customs Duties on most favored nations (MFN)
- Conventional customs duties
- Special Preferential customs duties
- General customs duties
- Quota customs duties (RQT)
- Temporary cutoms duties
Customs duties on most favored nations (MFN)
MFN taxes (Most Favored Nation) are the most often followed customs duties. Broadly speaking, it is widely less important than overall rate Applied on non – MFN countries. Products concerned by This taxes are :
- Imported goods towards China from a WTO member country.
- Goods from countries or Territories having ratified a bilateral trade agreement which stipulate the provisions of the application of MFN taxes with China.
- Goods from China
Conventional Customs Duties
It is Applied on imported goods from countries or Territories having ratified a regional trade agreement which stipulates the provisions on customs duties with China.
Special preferential Customs Duties
It is Applied on imported goods from countries or Territories having ratified a trade agreement which stipulates the provisions of preferential laws with China. In general, these tariffs are lower than MPF rates and conventional customs duties.
General customs duties
The general tax is enforced on imported goods from countries or Territories with any agreements and treaties or from unknown origin.
Quota customs duties
The tariff quota law submitted imported goods to a lower tariff rate. For imported goods which outreach quotas, there is a more significant tariff rate.
For example, respecting the quota, tariff quota Applied on soft wheat is 1% – It is significantly lower comparing to MPF (65%) and to general customs duties (which represents130 % of tax applied).
Temporary customs duties
In 2016, China have been adopted these temporary customs duties which are lower than MPN. These 787 imported Products concerned by this tax are:
- Baby diapers (2%)
- Sun glasses (6%)
- Kaolinite (1%)
- Health care products (Skin cosmetics = 2%)
Since 1th June 2015, China decreased its customs tariffs for 14 types of goods. This Measure has been put into practice due to the decision made by the Chinese government of changing its tax policy for encouraging and increasing the domestic consumption.
Here is the list of imported goods concerned by customs duties:
- Cosmetics 2 % instead of 5%
- Shoes 12% instead of 22%
- Products made from fur 10% instead of 23%
- Outside clothes: 8 to 10% instead of 17,5 to 24%
- Cashmere and hosiery items: 7% instead of 14%
- Baby diapers : 2% instead of 7,5%
Other customs duties
In China, there is other customs duties with a higher tariff. It was a necessary decision to make in order to fight against dumping, misuse of funding’s and implementation of safeguards. When a country does not respect a trade agreement, it is possible to apply this kind a deterrent measure, but it is exceptional.
Duty Applied to Technical Equipment
In 2017, has been published a “catalogue of products and technical equipment’s approved by the government “since 1st January 2018.
Taxes and customs duties on imported products are calculated in function of the value of the article and the price paid by the buyer. It is called Duty Paying Value (DPV)herefore, export some specific tools is not anymore subject to customs duties for Chinese companies (Tariffs depending on the goods which are imported).
DPV takes freight charges and insurances into account, however customs duties and paid taxes are not.
How it is possible to calculate taxes and import duties?
It is possible to calculate import tax and customs duties in relying on the DPV (Duty Paying Value) and tax rate on goods.
A few of raw Materials picked and semi-finished products are subject to customs duties. In 2016, some products including crude oil, fertilizers or iron alloys are submitted to temporary customs duties to preserve natural resources
Import Duties calculation
Ad Valorem Method
|DPV x Customs tariff|
|Quantity of imported goods x cost of customs duties per unit|
|DPV x Tariff + Quantity of imported goods x cost of customs duties per unit|
|Calculation with RMB method and strandard exchange rate from The People’s Bank of China.|
Import and export customs duties are calculated with the DPV
For exportation, DPV is based on a negotiate Price, it means on the price paid by the local seller who is exporting.
Customs Fees and Taxes in China
In order to make your shipment between China and USA, UK, AUSTRALIA, CANADA, and others more efficient, Sino Shipping experts in Customs issues, will do for you all the necessary formalities. These administrative aspects are complicated, and any mistakes could retard and even stop completely the shipping. For preventing these possible issues, entrust your goods transportations to our Sino shipping expert, who we will take over the transit of your goods to the destination. Our experts located in China guarantee you an efficient and quick management of your customs formalities.
Importation process implemented by customs.
The customs clearances can take times and retard your shipping. In order to prevent from that, it is recommended to anticipate the declaration of all the information whose customs need. After having submitted the shipment of your goods, you will help for the good execution of the shipping between these two countries.
The declaration of goods submitted to customs authorities can be done by Internet. You only need to Connect to the web site and indicate the delivery address and some information’s. After having complete all the information, an analysis will be done to confirm the delivery of your goods. The payment on customs duties is done by bank transfer.
Documentation that it must be provided to customs authorities will depend on the category of the product transported. However, some documents are mandatory: Bill of landing, receipt, la facture, packing, customs declaration insurance, sales contract.
Specific procedures of importation
Some categories of products need a specific inspection such as Agri-food products (by the Health service)
It exists also some categories of products forbidden to import in China such as: weapons, documents which could push the Chinese government back and the economy or poison, drugs, some animals, hazardous plants, food or medicine from countries affected by diseases.
All samples imported in China have to be declared to the customs authorities for inspection. Samples and goodies are taxable according to the product code (HS) Number and nature. Only a few exceptions exist.
Goods intended to exhibition or demonstrations for fairs/ commercial events are not submitted to customs duties
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Custom Value of goods when you import:
It is evaluated to determinate duties and taxes. If you have any regulatory questions, contact the economic action center and general direction of customs in your region.
General rules for determinate the value according to customs authorities.
The method Applied by all customs in the world is based on HS code and the declared value of goods.
In the case of sale of goods imported
When goods are sold during the importation, an evaluation is done according to the transactional value. Also, it could have an increase or decrease in accordance with fees to ad or to reduce on its value.
Factors added on the Price
Here the list of cost, products, delivery on production, usage and transit:
- Commissions on sales
- Cost of packaging
- Price of contribution
- Cost of amount fees and license fees
- Value of each part of the product
- Cost of transportation, insurance and handling fees
Each factor which is added to the paid price or to be paid has to be based on datas which are objective and measurable.
Factor deductible to the price
After the importation of some goods, there are some costs which are not to be consider and not to be included in the paid price/ to pay.
- Fees on works
- Cost of post-shipment transportation.
- Duty and taxes on sales or importation
- Reproduction right
- Purchase Commissions
- Interest on deferred payment
All these fees are deductible on the cost when they have not been included in the price and the most import thing, when it is possible to quantify and identify it.
When there are no sales or a reject of the transaction value
In the case of imported goods whom the aim is not to be sold like free goods, imported consignment goods, borrowed or rented objects etc. Or, when the transactional value is rejected. In these case, we have different method to determinate the value:
|Transactional value allows us to establish the custom value which is accepted by customs authorities and concerns the same goods, from the same country, imported at the same time and with the same commercial value.|
|Value is fixed from a resale cost|
|We determine value according to the cost of raw materials, the manufacturing process, profits and shipment costs.|
Last resort Method
|Here, reasonable ways are used in giving objectives that we can easily quantify.|
|Generally, this application is aimed to use one of the methods in the simplest way. It exists two others case to consider it, which are the AVP and the AJ as well.|
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