Import-Export Taxes and Duties in China
China has promulgated a series of regulations to reduce import-export taxes and duties to promote a higher level of openness and domestic consumption, made more urgent due to the ongoing US-China trade war.
These changes could affect companies that import and export taxable goods and services with China. The new regulations expand on previous import and export taxes and duties, which vary depending on the products involved.
However, governing this intricate system is a central list of general principles for foreign companies to abide by. Below, we outline the most significant issues relating to these taxes and duties that foreign companies should take note of.
The following three types of taxes are applicable to companies importing products from or exporting products to China:
- Value-added tax;
- Consumption tax; and
- Customs duties.
Value-added tax for imported goods
From April 1, 2019, China’s import VAT on imported goods has been lowered to either nine percent or 13 percent, down from the previous 10 percent or 16 percent, according to the Announcement of the State Taxation Administration (STA) on Deepening the Reform of VAT (STA Announcement  No.39).
The nine percent tax is available for certain goods that fall mainly within the categories of agricultural and utility items, while the 13 percent tax applies to other goods subject to the VAT like manufactured goods.
Taxable services provided by foreign entities or individuals in China are subject to six percent of VAT as before.
The import VAT can be calculated based on the following formula:
Import VAT = Composite Assessable Price × VAT Rate
= (Duty-Paid Price + Import Duty + Consumption Tax) × VAT Rate
= (Duty-Paid Price + Import Duty) / (1-Consumption Tax Rate) × VAT Rate
Consumption tax for imported goods
China’s consumption tax (CT) is imposed on companies and organizations who manufacture and import taxable products, process taxable products under consignment, or sell taxable products.
Imported products taxable under China’s consumption tax include those that are harmful to one’s health like tobacco or alcohol, luxury goods like jewelry and cosmetics, and high-end products, such as passenger cars and motorcycles.
For imported goods, the consumption tax varies depending on the type of product being brought into the country.
Calculating consumption tax can be done by using either the ad valorem method, quantity-based method, or the compound tax method. The formulas to compute the consumption tax are as follows:
- Ad valorem method
Consumption Tax Payable = Taxable Sales Amount × Tax Rate
- Quantity-based method
Consumption Tax Payable = Taxable Sales Quantity × Tax Amount per Unit
- Compound tax method
Consumption Tax Payable = Taxable Sales Amount × Tax Rate + Taxable Sales Quantity × Tax Amount per Unit
Customs duties include import and export duties, with a total of 8,549 items taxed, according to the Notice on the Tariff of Import and Export of PRC (2020) (Tariff Commission Announcement  No.9).
Starting January 1, 2020, China has further adjusted parts of its customs duties, including MFN duty rates, temporary duty rates, conventional duty rates, etc., covering agricultural, medical, manufacturing, and information technology industries.
The updated complete master list of products affected by customs duties can be found here.
Duty rates on import goods consist of:
- General duty rates;
- Temporary duty rates
- Most-favored-nation duty (MFN) rates;
- Conventional duty rates;
- Special preferential duty rates; and
- Tariff rate quota (TRQ) duty rates.
General duty rates
General duty rates are applied to imported goods originating from countries or territories that are not covered in any agreements or treaties or are of unknown places of origin.
Temporary duty rates
China also sets temporary duty rates for certain imported goods in order to boost imports and meet domestic demand.
According to the Notice on Adjustment Plan of Import Temporary Tax Rate in 2020 (Shui Wei Hui  No.50), starting January 1, 2020, China has implemented temporary tax rates on a total of 859 imported commodities, which are even lower than the MFN tariffs, including on raw materials of anti-cancer drugs, diapers, some frozen foods, and kaolin.
The complete list of products affected by the temporary duty rates can be found here.
MFN duty rates
MFN rates are the most commonly adopted import duty rates. They are much lower than the general rates, which apply to non-MFN nations. They apply to the following goods:
- Goods imported to China from WTO member countries;
- Goods originating from countries or territories that have concluded bilateral trade agreements containing provisions on MFN treatment with China; and,
- Goods that originated from China.
The products affected by MFN duty rates can be found in the master list of China’s import and export tariffs.
From July 1, 2020, MFN duty rates on 176 of 484 information technology products has further been reduced, including on medical diagnosis machines, speakers, and printers (please refer to the list of the MFN duty rates for some information technology products).
Conventional duty rates
Conventional duty rates are applied to imported goods that originate from countries or territories that have entered into regional trade agreements containing preferential provisions on duty rates with China.
So far, China has signed bilateral or multilateral free trade agreements with more than 20 countries or regions. Imported goods originating in these countries and regions will be subject to conventional duty rates, which is normally lower than the MFN duty rates.
From January 1, 2020, China has reduced conventional duty rates with New Zealand, Peru, Costa Rica, Switzerland, Iceland, South Korea, Australia, Georgia, and Asia-Pacific Trade Agreement countries. From July 1, 2020, China has further reduced the conventional duty rate with Switzerland.
Also, except for the products to which mainland China has made special commitments in relevant international agreements, zero tariffs will be applied to all products originating in Hong Kong and Macao (please refer to the master list or the 2020 version of conventional duty rates for imports).
Special preferential duty rates
Special preferential duty rates are applied to imported goods originating from countries or territories with trade agreements containing special preferential duty provisions with China.
They are generally lower than MFN rates and conventional duty rates (please refer to the master list).
Tariff rate quota duty rates
Under tariff rate quota (TRQ) schemes, goods imported within the quota are subject to a lower tariff rate, and goods imported beyond the quota are subject to higher tariff rates.
For example, the TRQ rate for importing wheat products within the quota is as low as one, six, nine, or 10 percent – substantially lower than the MFN duty rate of 65 percent and the general duty rate of as high as 130 percent or 180 percent.
The complete list of products affected by Tariff rate quota duty rates can be found here.
Export duties are only imposed on a few resource products and semi-manufactured goods.
From January 1, 2020, China continues to impose export tariffs or impose provisional export duties on 107 export commodities with fixed and unchanged tax rates.
Among them, the provisional export tax rate is canceled for 94 taxable items, such as fertilizer, apatite, iron ore, etc.
The complete list of products affected by export duties can be found here.
Other duty rates
Considerably higher rates may be implemented according to Chinese regulations regarding dumping, anti-subsidies, and safeguard measures. Retaliatory tariffs could also be applied to goods originating from countries or regions that violate trade agreements.
Over the course of the US-China trade war, China has imposed retaliatory tariffs on US$185 billion worth of US goods, including beef, lamb, pork, vegetables, juice, cooking oil, tea, coffee, refrigerators, and furniture, among many others.
Duty relief for key technical equipment
At the end of 2019, China had released the Catalogue of State-supported Key Technical Equipment and Products (2019 version) and the Catalogue of Imported Key Components and Raw Materials of Key Technical Equipment and Products (2019 version), which took effect on January 1, 2020.
Importing certain key components and raw materials or exporting certain key technical equipment and products listed in the catalogue to eligible Chinese domestic enterprises is exempt from import VAT and customs duties.
Duty paying value for imported goods
The amount of import taxes and customs duty payable is calculated based on the price or value of the imported goods. This value is called the duty paying value (DPV).
The DPV is determined based on the transacted price of the goods – that is, the actual price directly and indirectly paid or payable by the domestic buyer to the foreign seller, with certain required adjustments.
DPV includes transportation-related expenses and insurance premiums on the goods prior to unloading at the place of arrival in China. Import duties and taxes collected by customs are excluded from DPV.
Calculating import–export taxes and duties payable
Import taxes and duties payable can be calculated after determining the DPV and the tax and tariff rates of the goods. The formulae are:
Import taxes and duties payable can be calculated after determining the DPV and the tax and tariff rates of the goods. Similar to consumption tax, customs duties are also computed either on an ad valorem basis, quantity basis, or compound formula. The formulas are:
- Ad valorem basis:
Duty payable = DPV x Tariff rate
Duty payable = Quantity of imported goods x Amount of duty per unit
- Compound formula:
Duty payable = DPV x Tariff rate + Quantity of imported goods x Amount of duty per unit
Import taxes and duty payable should be calculated in RMB using the benchmark exchange rate published by the People’s Bank of China.
The tax base for export duties is the same as import duties – that is, the DPV.
The DPV for export duties is based on the transacted price, that is, the lump sum price receivable by the domestic seller exporting the goods to the buyer.
Export duties, freight-related expenses, and insurance fees after loading at the export spot, and commissions borne by the seller, are excluded.
This article was originally published in March 2013. It has been updated on June 11, 2019 and July 15, 2020.
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