1/ General information about the Chinese tax system

 

If you want to import goods into China, it is essential that you should understand in details how does the Chinese tax system work before clinching any contract. First of all, importing goods into China can generate three types of taxes:

  • Import duties
  • Import value-added tax
  • Consumption tax

*Of course, it depends on the nature of the imported goods and on whether they are subject to specific restrictions or not.

 

1.1 Import Duties

The duty rates when importing into China consist in many different rates such as the most-favoured-nation duty rates, conventional duty rates, special preferential duty rates, general duty rates, tariff rate quota duty rates and temporary duty rates.

More specifically, when it comes to the most-favoured-nation duty rates, we can identify the general tariff rates and the preferential tariff rates:

  • If you want to import goods from a country that does not take part in the most-favoured-nation trade agreements, then, the general tariff rates for importation go from 0%, 8% up to 270% with more than 20 different rates.
  • If you want to import goods from a country that has effectively concluded most-favoured-nation trade agreements, then the preferential tariff rates go from 0%, 1 % up to 121.6% with more than 50 different rates.

 

1.2 Import value-added tax

This tax concerns almost every business transaction in China and it has to be paid monthly.  

There are three categories of VAT rates, according to the nature of the goods you want to import:

  • The standard VAT rate of 16 % is imposed on imports into China. Its value is highly related to the customs value and the cost of insurance and freight (CIF). This rate concerns sale of goods, processing, repair and replacement services as well as physical property leasing or impartation.
  • A lower rate of 10 % applies to transportation tools sales, postal service, basic telecommunications, architecture, real estate lease and sales, land use right transfer, sales or import of agriculture products, tap water, natural gas.
  • A special VAT rate of 6 % is applied to goods sold by certain small-scale taxpayers.

How to get the status of a small-scale taxpayer?

Those already registered as general VAT taxpayers have the option to transfer to small-scale VAT taxpayer status until December 31, 2018, if they meet the criteria.

If you want to be considered as a small-scale VAT taxpayer, you will have to meet a business’ annual revenue criteria. Previously, there were three separate industry-specific categories to determine small-scale VAT taxpayer status. With the new regulation, the three categories have been unified into a single one.

Industry Old law New law
– Manufacturing of goods or provision of taxable labour services– Primarily engaging in manufacturing of goods or provision of taxable labour services and concurrently engaging in wholesale or retail of goods  

≤ CNY 500 000

 

 

≤ CNY 5 000 000

Wholesale or retail of goods ≤ CNY 800 000
Provision of services originally subject to business tax ≤ CNY 5 000 000

 

1.3 Consumption Tax

Whether as an individual or as an organization, as long as you import taxable consumer goods, you are subject to the consumption tax is applied.

More specifically, the consumption tax is levied on the following four categories of products:

Categories Taxable Items Tax rates
Products whose over-consumption is harmful to health, social order and the environment 1. Tobacco, Cigars, Cut Tobacco 50%, 25%, 30%
2. Alcoholic drinks and alcohol From 5% to 25%
6. Firecrackers and fireworks 15%
Luxury goods and non-necessities 3. Cosmetics 30%
4. Skin-care and hair-care products 8%
5. Precious jewellery, pearls, precious, jade and stones Between 5% and 10%
Non-renewable and non-replaceable petroleum products 7. Gasoline Between 0.3 and 0.28 CNY per litre
8. Diesel 0.1 CNY per litre
High-energy consumption and high-end products 9. Motor vehicle tyres, motorcycles, motor cars 10%, 10%, between 3% and 8%

Consumption tax is filed and has to be paid monthly. As you may have seen, tax rates vary considerably according to the type of product. Moreover, it is calculated ad valorem or based on the volume of sales.

regulation import export

 

2/ New regulations – Changes to China Import Regulations

 

Regulations that control the import of goods and their subsequent sale on China’s domestic market are very complex and it keeps on evolving. Indeed, over the last years, the General Administration of Customs China implemented a series of new regulations that directly have an impact on companies that import taxable goods in China.

The latest revisions, that were effective on June 1, 2018, affected the manifest rules of imports and exports in China. The adjusted rules include the following:

  • Manifest submissions must be made 24 hours prior to loading. This includes all vessels going to or coming from any mainland ports in China.
  • The cargo description must be complete and accurate.
  • Full contact details of the shipper and consignee are mandatory, as well as the enterprise codes.

3/ Imports classification

 

The China’s Ministry of Commerce has classified goods in three categories: the permitted goods, the restricted goods and the prohibited goods.  Certain goods are banned from being imported, while products that are subject to restrictions require quotas or licenses.

 

3.1 The permitted goods

This category is automatically licensed, that you need a license to ship goods out of China, but this latter will be issued automatically on application. The automatic license is valid for six months, and you may have up to six batches of goods on it.

 

3.2 The restricted goods & prohibited goods

The restricted goods can be exported, but either license approval or annual quotas allows their control and their regulation. This type of goods can be exported but an approval has to be issued for each shipment, knowing that its validity time is one year. 

The exportation of prohibited products is for its part, absolutely banned. Various authorities including MOFCOM define the list of prohibited goods.

Please find the list of prohibited and restricted goods herein below:

1. Weapons, simulated weapons, ammunition and explosives
2. Forged currency or securities
3. Printed matter, films, photos, movies, audiotapes, videotapes, CDs, DVDs, computer storage devices and other things that could do harm to China’s politics, economy, culture and morality
4. Poison and addictive drugs
5. Food, drugs or other things that could do harm to humans and animals, and are infectious or from epidemic areas
6. Animal and animal products:

  • All living animals (excluding dogs and cats) and their sperm, zygotes, embryos and other genetic things
  • Uncooked or cooked meat (including internal organs); marine animal products
  • Milk of animal and its products, silkworm chrysalis, silkworm eggs, animal blood and its products, products of aquatic animals
  • Eggs and its products those are not heat-treated
  • Fur, mane, bones, horns, oil and fat, fleshes and the corresponding products
  • Edible bird’s nests (excluding canned bird’s nests)
  • Transgenic biomaterials
7. Plants and plant products:

  • Fresh fruit and vegetables
  • Tobacco leaves (excluding cut tobacco)
  • Seeds, sprouts, nursery stock and other fertilizable plants
  • Organic cultivation medium
  • Soil
8. Other quarantine types:

  • Animal bodies, samples or specimens, and offal from animals
  • Transgenic biomaterial
  • Pathogens of animals and plants, injurious insects and organisms
  • Human blood and corresponding products

4/ Import licences

 

There are two types of import licenses: the automatic licenses and the non-automatic licenses. The first type concerns the permitted goods and the second one affects both the restricted and the prohibited goods.

 

4.1 Automatic License

Most products are permitted goods and only need an automatic import license. In this case, the licence is issued automatically to all applicants and is only used to track imports more accurately.

Once you have managed to get an automatic import license, you will have no restrictions when it comes to the amount of import licenses you can receive, you will just have to apply fort it each time you want to import another type of items.

Each automatic import license can be used for a time of 6 months, and usually for imports of one batch.

4.2 Non-automatic License

Non-automatic import licences are used to control the importation of restricted and prohibited goods but also to implement tariff rate quotas. Indeed, because restricted goods are subject to import regulations due to quotas implemented by the government, a non-automatic license is required before trying to import.

4.3 What information is required to apply for an import license?

Moreover, the information that is usually required for an application is the following one:

  • Importer’s company name and company number
  • Consignee in China
  • Automatic import license number and expiry date
  • Terms of trade and of foreign exchange
  • Place of clearance
  • Country/region of exportation and of origin
  • Use of goods
  • Description of goods and product code of goods
  • Specification, unit, quantity, unit price
  • Supplementary details
  • Issuing authority stamp

Conclusion

In short, you must identify well the nature of the goods you want to import and its category (permitted, restricted or prohibited). Then, you have to establish what kind of taxes it suggests that there suggest and for what type of import license you have to apply. If you have any doubt, please contact our Customs Clearance experts.

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