How much do you know about Chinese import tax?

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Introduction

As long as you open a company in China, you may have to pay Chinese import tax. It is because all goods from outside China have to pay taxes to pass the customs.

Let’s have a look at the impact of Chinese import tax on foreign-invested enterprises in China.

What is Chinese import tax

We will begin with the introduction of Chinese import tax first. If you have already known it, you can choose to skip this part.

Before we learn about it, we need to know what tax is and what tariff is.

There are 18 kinds of taxes in China. Among them, two kinds of taxes are levied by the Chinese customs, namely tariff and tonnage tax.

A tariff is a kind of high-level tax which is designated by the highest administrative unit of a country. For a country with developed foreign trade, such as China, the tariff is often the main part of the country’s national finance. The government can impose tariffs on both import and export commodities, and import tax is the most important.

That is, Chinese import tax is one kind of tariffs.

And it is imposed by the Chinese customs on imported goods. It is mandatory. As every country no longer uses transit tariff nowadays, and also, export tax is rarely used, the tariff we call today mainly refers to the import tax.

The subject of the tax is goods allowed to be imported into China, and articles entering China.

Why and what do I need to know about import tax?

At this part, you will know why a foreign investor needs to know about import tax.

All trade that involves importing is closely related to the import tax. If you import goods into China, the Chinese import tax will increase the cost. Therefore, to deal with the import tax and minimize the impact on cost, you should know more about it, so that you can save cost and gain the most profits.

Now we know that import tax is crucial to the success of a business. Then what should a foreign investor need to know about import tax?

Articles not subject to Chinese import tax

First of all, you should have a general understanding of articles that are not subject to Chinese import tax.

Generally, the following importing articles are exempt from Chinese import tax. They are

  1. goods listed in the import and export tariff rules as duty-free goods,
  2. goods and materials donated by foreign governments and international organizations,
  3. gifts offered by foreign organizations and individuals,
  4. materials for disaster relief,
  5. equipment for the disabled and for welfare factories where the disabled work,
  6. Official articles enjoying diplomatic privileges,
  7. Imported goods that are damaged and granted tax exemption,
  8. Goods that haven’t been processed after import and transported for reexport within 90 days,
  9. temporarily imported goods,
  10. military orders granted duty-free import
  11. other goods subject to tax reduction or exemption and bonded.

How the Chinese import tax is calculated

The list above suggests that almost all imported goods are subject to Chinese import tax. Now we are going to introduce how the Chinese import tax is calculated.

There are two commonly used methods of import tariff collection in China. They are AD Valorem collection and quantity-based collection.

AD Valorem collection means that the tax is levied according to the dutiable value of import goods. The AD Valorem tariff you need to pay is equal to dutiable value multiplied by the AD Valorem rate.

So far, you may have doubts here. What is the dutiable value of import goods?

The dutiable value of import goods is actually the CIF price of import goods. But sometimes when the CIF price is not clear, the customs will estimate the value of import goods and then determine a dutiable value.

Then let’s see the quantity-based collection.

Quantity-based collection, another commonly used method, means that the tax is levied according to the quantity of import goods. The tariff is equal to the quantity of import goods multiplied by the quantity-based rate.

There are other methods of Chinese import tax collection, such as compound collection. (Find more details on Wikipedia if you want to know more collection methods.)

A list of general Chinese import tax for various goods

After introducing Chinese import tax, I hope the following list of general Chinese import tax for various goods will be useful to you. The list is summarized from an announcement on the adjustment of Chinese import tax on imported goods, released on April 8, 2019.

Imported goodsTax rates
Food, Beverage and Medicine13% (some medicine: 3%)
Alcohol50%
Tobacco50%
Textiles20%
Leather clothing20%
Bags, Shoes20%
Watches, Clocks20%

( watches priced above RMB 10000 : 50%)

Gold, Silver, Jewelry and jade50%

(gold and silver: 13% )

(diamonds: 20%)

Cosmetics, Toiletries50% / 20%
Medical Device20%
Sanitary Tools20%
Furniture13%
Air conditioning, Refrigerator, Washing machine, TV set, Photographic equipment20%
Computer13%
Print13%

If you engage in importing trade, you had better attach importance to Chinese import tax because it really affects the cost and profits. It is of great significance for you to know the latest import tariff information in time. Follow our website, and you can easily get the latest information!

Are there any preferences on the import tax?

Although Chinese import tax will increase the cost, the Chinese government have made some preferential tariff policies, to attract foreign investment. So, knowing about some preferential import tax policies may help you a lot in terms of cost-saving. At the following part, I will introduce preference for imported self-use equipment, the preferential import tax on some goods, and applying for the cancellation of additional tariffs.

Preference for imported self-use equipment

According to an announcement No.35 of 2007, suppose a foreign-invested company is encouraged by China. That is, the main business of this company is included in the encouraging projects in the Catalogue for the Guidance of Foreign Investment Industries.

For this company, the tariffs of equipment and its accessories, supporting technology, and spare parts which are imported for personal use, are zero. As long as the equipment and accessories are allowed to be imported. And the amount of imported equipment should be within the total investment.

Besides, if the foreign-invested company is located in some specific areas, such as the mid-west of China and Guangxi Province, the company will enjoy more preferential Chinese import tax policies. It is because the government of those regions have issued a series of preferential policies to attract foreign investments.

Preferential import tax on some goods

From January 1, 2020, China will implement the provisional import tariff rates for more than 850 items of goods. The provisional import tariff rates are even lower than the most-favoured-nation rates.

For daily consumer goods with foreign characteristics, such as frozen pork and frozen avocado, the import tax rates are lower than before. For alkaloids and raw materials of new type diabetes treatment drugs, the tax rates are zero! The reduction of tax rates for imported technology and equipment of the high-tech industry is obvious.

From July 1, 2020, China has implemented the fifth reduction of tax rates for 176 information technology products, so that China can expand space for trade development and share development achievements with other countries.

Applying for the cancellation of tariff increase

According to the information from the website of the General Administration of customs, since March 2, 2020, the elimination of market-oriented procurement of goods subject to the tariff on the United States has been officially implemented.

Enterprises can apply for no additional countervailing tariff on the United States on the qualified imported goods imported from the United States. At present, a company has successfully applied for tax exemption for the first ship of U.S. soybeans. 27.5% of the additional tariff has been reduced, totaling 46.33 million CNY/RMB.

Although the policies seem a bit complicated, the tax exemption procedure is very easy and convenient. So, don’t worry about it. If you want to apply for tax exemption, what you need to do is handle the archival filing formalities at customs and declare to customs with the hold of complete and valid documents for examination and approval formalities for tax exemption before importing the goods.

Find more on tax preferences on All about Chinese Tax Return and China Tax Policy for Foreign Companies – The Common Q&A.

Other taxes to know besides Chinese import tax

Besides Chinese import tax, a foreign investor needs to pay attention to other taxes as well, because other taxes will also have a great impact on the business.

Here is a list of 18 different kinds of taxes in China.

CategoriesSerial NumberTaxes
Goods and Services Taxes1VAT
2Excise Tax
3Vehicle Purchase Tax
4Customs Duty
Income Taxes5Enterprise Income Tax
6Individual Income Tax
Property and Behavior Taxes7Land Appreciation Tax
8Real Estate Tax
9Urban and Township Land Use Tax
10Farmland Occupation Tax
11Deed Tax
12Resource Tax
13Vehicle and Vessel Tax
14Stamp Tax
15Urban Maintenance and Construction Tax
16Tobacco Tax
17Vessel Tonnage Tax
18Environmental Protection Tax

(source:http://www.chinatax.gov.cn/eng/c101270/c101272/c5094513/content.html)

Conclusion

In this article, we learned

  • Chinese import tax is one kind of tariffs and its subject is imported goods and articles.
  • The reason why I need to know about Chinese import tax
  • Articles not subject to Chinese import tax
  • How the Chinese import tax is calculated
  • A list of general Chinese import tax for various goods
  • Preference on the import tax
  • Other taxes to know besides Chinese import tax

We hope this article will be useful to you. If you think so as well, don’t hesitate to follow us and share with your friends.

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