Ever wondered what China’s import fees are, and how these fees can impact other financial services in China that are relevant to your company? If you answered yes, then this article is for you.
China’s Import Fees
Import related value-added tax (VAT)
VAT is charged on sales and importation procedures in China. In late 2023, and for the first time in China’s history, the government is expected to officially enact a national VAT law that will codify and centralize all VAT regulations in China. According to the new law, the VAT rates for products and commodities imported into China are as follows:
- 0% VAT rate – for exported goods, cross-border sales of services and other intangible assets
- 3% VAT rate – for small taxpayers
- 6% VAT rate – for value-added telecommunication and financial services, lifestyle services, and domestically sold intangible assets
- 9% VAT rate – for agricultural, utility products, audio-visual products, and immovable properties
- 13% VAT rate – for other product types
- A new preferential policy stipulates that between January-December 2023, small-scale VAT taxpayers with a monthly sales volume of less than 100,000 RMB, or with a quarterly sales volume of less than 300,000 RMB will be exempt from VAT.
The general formula for import VAT calculation is as follows:
Composite Assessable Price × VAT Rate
Consumption tax is one of the two indirect taxes imposed in China since 1994. It is applicable to companies who manufacture / sell / process / import taxable merchandise into China, such as tobacco, alcohol, jewelry & cosmetics, cars, and motorbikes. Exported goods are exempted.
Consumption tax is levied on the following goods (14 product categories altogether):
- Products that are harmful to health and the environment (e.g., tobacco, alcohol, etc.)
- Non-essential commodities and luxury goods (e.g., expensive jewelry, cosmetics, yacht, etc.)
- Products that consume high-levels of energy, and thus cause pollution (e.g., motorcycles)
- Non-recyclable products (e.g., oil, gasoline, disposable chopsticks, etc.)
The consumption tax rate for taxable products brought into China is subject to changes based on their type (vary on a broad scale of between 1%-56%). The calculation of consumption tax is done either by ad valorem or quantity methods.
Custom duties – importation
Custom duty for China imports is divided in accordance with various criteria:
- Most-favored-nation duty (MFN) rates – apply to goods imported from countries that are WTO members; goods imported from countries that have bilateral trade agreements with China; and goods produced in China. The MFN duty is usually lower than other duty rates, which are charged from non-MFN countries.
- Conventional duty rates – are usually lower than MFN duty rates. Apply to goods traded between China and one of the 29 countries that China has regional trade agreements with. In January 1st 2023, China reduced the conventional duty rates even further with certain trading countries (e.g., Australia, New Zealand, Switzerland and others).
- Special preferential duty rates – are usually lower than both MFN duty rates and conventional duty rates. Apply to goods imported into China from countries with trade agreements stipulating special preferential duty provisions with China.
- General duty rates – apply to goods imported into China from countries that are not part of any agreement with China, or brough into China from unknown origins.
- Tariff rate quota (TRQ) duty rates – apply to goods that are imported into China in quotas. Goods imported withing the quota enjoy a lower tariff rate. However, goods exceeding the quota are charged higher tariff rate.
- Temporary duty rates – apply to specific imported goods, which have been deliberately chosen by the Chinese government to increase imports and meet domestic demand. In 2019, low temporary duty rates were imposed on 706 imported products, which are lower than the MFN duty rate.
Major tariff reliefs in place since 2023
- Reduced national tariff rate: According to the 2023 Tariff Adjustment Plan, China’s general tariff rate has been reduced from 7.4% to 7.3%.
- Provisional tariff rates on 1,020 imported commodities: The new provisional tariff rates are lower than the MFN (most-favored-nation) rates, and some of the +1000 items are even eligible for a zero tariff. This list of commodities has grown by 7% from 2022’s list, which contained only 954 items. The relevant items belong to four primary industries: healthcare & medical supply, industrial supply chain, advanced manufacturing, and food & household appliances. Companies operating within these industries benefit from lower tax bands and have more leverage to price competitively.
- Reduced MFN tariff rates on 62 IT products (taking effect in July 2023): In line with the high priority IT takes in the eyes of the Chinese government, this July, additional 62 IT products will enjoy a further cut in the MFN tariff rates.
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Last updated: Aug 2023