What is China Import Tax and How to Calculate Customs ? Everything You Should Know When Importing from China 2022

Are you unaware of China import tax but need to buy products from China?

Do you know how to calculate China import tax and duties?

If you want to work with some Chinese suppliers or expand your business in China, it is crucial to know about China’s import tax and calculation related to it. Having your own understanding of China import tax will help your company save a lot of tax matters.

The rate of China Import tax varies according to standard rules of importing in and importing from China. If you are fully aware of the import duties before importing something, then it will help you in your business as well.

In this blog, we will discuss the import duties, items that are included in import tax, and duties in detail. The method of calculating the custom duties and taxes by yourself will also be discussed.

Chapter 1: What is China Import Tax? New-updated Information

In this chapter, our prime focus will be to cover the topic of “China Import Tax” with the new-updated information. We will share the primary knowledge of import duties and link it with China especially.

1. What are China’s import and export duties?

The import and export duties of China are discussed below.

a. China import tax

The import tax is something that refers to the normal duty applied on the importers’ goods in the customs office.

It is also crucial for a country to implement foreign policy. Depending upon the needs of the political and economic relations, countries apply different tax rates on the same products as differential treatment.

If this is set as a standard, then import duties can be divided into ordinary duty, most-favored-nation duty, preferential duty, and general preferential duty.

b. China export tax

The export tax is applied on the products which are expired from one country to another.

Nowadays, export tax is not applied in most countries because it increases the cost of export goods and foreign prices. This may reduce the competitiveness of the products from that country in foreign markets.

Export taxes are applied basically to increase the domestic revenue. It also protects the domestic production of manufactured goods to satisfy the local market.

In China, the taxation on imported goods plays a vital role in generating financial revenue to influence the structure of imported goods.

2. What is the basis of China import tax?

In China, the duties are assessed on Cost-Insurance-Freight (CIF) basis. According to the rules of WTO, China uses the transaction value as a method of appraisement. Customs can use other valuation methods to determine the suitable value.

Tariff rates in China are 0% for some information and technology products whereas, rates for other products vary from each other.

Consumption tax is applied on the products like alcohol, cigarettes, fuel, cosmetics, luxurious watches, golf clubs, and automobiles.

The consumption rate and base vary from product to product. A 17%, 13%, or 0% value-added tax is applied on the imports depending on the landed cost. This shows that it is a sum of the CIF value of goods, duties, and consumption tax.

Some export products like mineral products, fertilizers, and steel products also pay the export duties.

3. What measures should be taken before importing products for import duties?

Following are some situations you may face while importing products from any country. We recommend you always check whether your goods need special treatments or not in advance.

a. Apply for licenses if need

Many products require a special type of permit and licenses from government agencies before importing into China.

The products like some classes of machinery and equipment, automobiles, and chemical products require the permission of government authority.

b. Fill an import entry

Import duties are files with customs whether the imported products are subjected to duties or not. The importers should collect the documents consisting of the import declaration form, invoice, bill of lading, and packaging list for submission.

The importer can perform this process by himself or consult with the customs broker. And the payment of customs duties and taxes are paid using the authorized electronic methods or agent banks.

c. Self-audit by companies

China Customs is providing an offer to the companies for performing a self-audit and disclosing the violations.

If the Customs find out the underpayment of duties by itself, then along with self-audit additional duties and taxes, the penalty will also need to be paid.

d. Anti-smuggling

In case of smuggling or criminal act, the China Customs rules are quite strict to be followed. They will conduct a criminal investigation, administrative investigation, and administrative punishment.

e. Temporary importation

Certain products are imported temporarily. Some are entitled to duty-free treatment so that they can be re-exported in the stated timeframe.

These products include exhibit pieces, demonstration units, and containers for goods. A guarantee deposit is also required before importing these items.

f. Processing trade

The raw material that is imported under the processing trade regime also falls under duty-free treatment. Therefore, the finished products can be exported.

4. What are the newest updates of China import tax?

According to the 2022 Tariff Adjustment Plan, there will be 8,930 imported items and 106 exported items that are taxed totally in China since 1 January 2022.

What’s more, China adopts provisional duty rates of 954 imported items that were subject to the default MFN duties. The provisional duty rates are lower than MFN tariffs.

Lower tariff rates will be applied for commodities such as anti-cancer drugs, medical products, aquatic products, sports equipment, oil paintings and antique artwork, high-efficiency auto parts, materials for environmental restoration, and mineral resources.

The conventional duty rates on products from 29 countries will be applied. For the reason that China has signed 19 bilateral or multilateral free trade agreements with these countries or regions.

Others about the new updated information of China import duties, please check the blog.

Chapter 2: 3 Types of China Import Tax and Duties That You Must Know

The import duties you may come across in China are of different types. In this chapter, we will discuss various types of China import duties.

1. Customs duties

Import duties and export duties are a part of customs duties. On importing products, the custom duty rates applied include:

• Most-favoured-nation (MFN) duty rates
• Conventional duty rates
• Special preferential duty rates
• Tariff rate quota (TRQ) duty rates
• General duty rates
• Provisional duty rates

There is only one type of custom duty rate on exporting products.

a. Which products need to apply the customs duties?

The products which need to be imported from any other country will be applicable to the custom charges, either duties or tax.

The products upon custom duties include household equipment, kitchen utensils, liquor, wheat, rice, cotton, chemicals, fertilizers, etc.

b. Different duty rates for importing the products

Different duty rates for importing products are discussed below.

• Most-favored-nation duty (MFN) rates

MFN duty rates are applied to the following products which are being imported to China:

• Imports from the WTO member countries will pay the MFN duty rate.
• Imports from the countries that have bilateral trade agreements will pay the MFN.
• Imports from China also pay the MFN charges.

MFN is one of the most commonly used import duty rates and is lower than the general rates.

Some products enjoy lower tariff rates like anti-cancer drugs, medical products, aquatic products, sports equipment, oil paintings, antique work, high-efficiency auto parts, materials for environmental restoration, and mineral resources.

China has also scrapped the provisional duty rates on some amino acids, lead-acid battery parts, gelatin, pork, and m-cresol and resumed the MFN duty rates.

• Conventional duty rates

Conventional duty rates are applied to the products that are imported from special countries or territories. The countries should fall under the regional trade agreements containing the preferential provisions on duty rates with China.

China has signed 19 bilateral multilateral free trade agreements with 29 plus countries or regions. The imported products from these regions offer lower conventional duty rates than MFN duty rates.

• Special preferential duty rates

Special preferential duty rates are applied to the products that are imported from the countries or regions that made the trade agreement with China.

It contains special preferential duty provisions. These duty rates are lower than the MFN rates and conventional duty rates.

• Tariff rate quota (TRQ) duty rates

The tariff rate quota (TRQ) is applied on products like wheat, corn, rice, sugar, wool, cotton, and fertilizer. The TRQ schemes say that the products imported within quota have high tariff rates.

For example, the TRQ value for importing wheat is less than 10%. It is substantially lower than the MFN duty rate of 65%, and the general duty rate is as high as 130% or 180%.

• General duty rates

General duty rates are applied on importing products from countries or regions which do not sign any agreement or treaties.

• Provisional duty rates

China updates the provisional duty rates to boost up the ratio of imports to meet up the domestic demand. The imported products which pay the MFN tariff rate should also pay the provisional duty.

The products which pay the conventional or special preferential duty rates should also pay the lower applicable rates. The provisional rates do not apply to the products with a general tariff.

2. Value-added tax

In China, the VAT taxable goods are based on the price, and their primary tax ratio is only 16%. The VAT rates vary according to the country’s economy and its people’s livelihood, and sometimes it is lower at 13%.

a. Which products fall under the value-added tax?

The following products fall under the VAT in 13% ratio:

• The grain, edible oil, vegetable oil
• Tap water, air conditioning, hot water, coal gas, LPG, natural gas, coal products
• Books, newspapers, magazines
• Feed, chemical fertilizers, pesticide, agricultural machinery
• Ores like metallic ore, non-metallic ore

3. Consumption tax

The consumption tax has two types, they depend on the situation of tax targets.

• Proportional tax rate
• Fixed tax rate

a. Items that need to pay consumption tax

The goods which have the balance of supply and demand with the small price difference and standard units of measurement like yellow rice, wine, beer, refined oil come under the fixed tax rate.

The goods that have a contradiction between the supply and demand with the bid price difference and non-standard measurement units (like tobacco, liquor, cosmetics, automobile tires, and jade, motorcycles, cars) come under the proportional tax rate.

Generally, one form of tax is chosen, but if you preserve the tax base consumption tax better, then for some goods like cigarettes and liquor, the fixed-rate and proportional tax rate is acquired in double taxation form.

Chapter 3: How to Calculate the China Import Taxes?

In this chapter, we will discuss the method of calculating the import taxes and introduce you to the terminologies you may come across while calculating the taxes.

1. What are the terminologies which are used in calculating China import tax?

The International Commercial Terms are used for explaining the price or risk-related issues with goods transactions. The commonly used contracts include:

• CIF (Cost, Insurance, Freight) expresses that the seller will look for the cost of freight and insurance for the safe delivery of goods to the delivery port.
• FOB (Free On Board) means that the buyer will look after all the expenses mentioned above by himself.

The import tax and customs duties are calculated based on the price of imported goods. It is known as Duty Paying Value (DPV), which depends on the transacted price of goods.

It also consists of transportation-related expenses and insurance premiums on goods before unloading on destination.

A value-added tax (VAT) is collected on a product at every stage of its production during which value is added to it, from its initial production to the point of sale.

The VAT or CT taxes are not applicable in PDV, rather the Composite Assessable Price (CAP) is the combination of DPV, import duty, and CT.

2. How to calculate the China import tax?

Using the following formula, you can calculate the value of DPV and CAP.

DPV = Cost of goods + Transportation cost + Cargo insurance

Import duty = DPV x Tariff rate

CAP = DPV + Import duty = DPV x (1+tariff rate)

VAT = CAP x VAT rate

For example, any Chinese company that imports machinery from a European state has made the deal in terms of FOB pricing. Then, all the shipping and insurance charges will be borne by the Chinese buyer.

The buyer needs to know how much the company needs to pay for the importing tax. The amount and value of goods will be the most important factors. After checking the related tax rates of your goods, you will have an idea about your final cost in import tax.

3. What are the items exempted from import VAT?

The exempted items from the import VAT are listed below:

• The imported instruments and equipment are used in scientific research, experiments, or educational labs.
• Imported materials and equipment are donated as non-reimbursable assistance by foreign governments or international organizations.
• Articles that are imported by the organizations for special use by disabled people.

4. What are the factors that should be considered while calculating the China import taxes?

It is necessary to know about the contract being signed when you are calculating the import taxes and duties. You should know about the International Commerce terms.

The tax liability is affected by the type of goods that are being imported. In this regard, consulting professional advisers will help you in saving your time and money in time.

5. What are the points that you should keep in mind while paying the China import tax?

There are various options through which you can pay the import duties and taxes. You can also submit the amount to the supplier directly. You should keep in mind the following points.

a. You can pay the import duties and taxes to the freight forwarder

It is one of the simplest ways to pay the customs duties. When your cargo arrives at the desired destination, the customs charges are applied to the products in the form of VAT. The custom charges depend on the value and the HS code.

The amount of tax applied to the product will be added to the invoice that you will receive from the shipping company. In some cases, you pay the customs charges before delivery.

In this way, you may get better payment terms if you are the account holder of the freight company. It is not free of cost as you will pay around $40-80 for the whole process.

b. You can apply for Customs credit from the local authorities

The Customs credit is provided to the importers by customs authorities only. It permits the person to receive his cargo first in a warehouse and pay the Customs tax and chargers afterward.

The payment method will be different as you will be supposed to do transactions directly to the Customs authorities instead of to freight forwarders.

c. You can purchase the DDP (Delivery Duty Paid) from the supplier

DDP refers to the charges which include customs duties other than shipping and port fees. DDP includes the amount which you pay to the supplier for import duty.

The VAT and GST taxes are not included due to cross-border taxation issues. However, these taxes are paid when the cargo reaches the destination.

Chapter 4: Frequently Asked Questions about China Import Tax

1. Do the increased freight costs affect China import duties and other taxes?

Import tariffs are applied in every country in importing products from any foreign country. You can also calculate the import tariffs based on the freight cost.

The freight cost and the import duty are linked directly with each other. If the freight cost is increased, then the import duty will also be increased.

2. Who will pay China import duties and other taxes?

The importer is the one who is responsible for paying the import duties and other taxes.

The importer should work on finding out which product has how much customs value and whether it is correct or not. This information will help him in paying the custom taxes on products.

When the products are being imported from China, the parcel is not delivered directly from the supplier to the customer. Certain requirements need to be fulfilled.

The customer will pay the import duties and taxes like VAT, GST. These customs duties and taxes are paid only based on customer value.

3. Are import duties refunded? How can I refund it?

Only the VAT duties are refundable, while the import duties are non-refundable. It is considered to be part of the product cost.

If you are asking for the VAT duties to be refunded, you can simply start the process from the supplier.

4. Why do some suppliers declare a lower customs value?

Sometimes, the customs may find that the customs value is quite low. The staff will directly ask the importer. They found that suppliers declare the lower customs value due to two reasons:

• Some of the manufacturers think that they are offering a favor to the customer by lowering the charges.
• Some suppliers don’t employ international taxation consultants. They are not aware of the Customs valuation laws of every country. It is the job of the buyer to calculate the customs value and inform the supplier and freight forwarder.

There are two types of costs that a buyer needs to consider:

• CIF (Cost Freight Insurance) includes the product cost, insurance amount, and all the transportation costs till the port of destination.
• FOB (Free On Board) includes the product cost along with the transportation cost in exporting the products.

5. How can I be sure that my supplier or freight forwarder declares the right Customs Value?

If you think that the freight forwarder is not providing the correct value. Then you can calculate by yourself. The formula is quite simple.

• You can calculate the value of customs duties using the valuation method of your market.
• You can inform your supplier or the freight forwarder about the customs value.
• You can ask for the copies of Bill of lading and invoices from the supplier or freight forwarder.

6. How do I locate the import tariff applied to a particular product?

The complete information regarding China customs issues is available in China Law and Regulations section.

Companies identify the harmonized tariff schedule number of a particular product before finding out the number of their products. This harmonized schedule number can be located by availing the Census Bureaus Schedule.

After the complete identification of the harmonized tariff number, the government provides the information to the exporters to find out the import tariffs.

The China tariff rates can also be given by the China tariff schedule present on World Trade Organization official website.

Conclusion

China is the business center of the world nowadays. People prefer working with Chinese people, and maximum suppliers of all types of goods are Chinese. So, when you need to trade in China, you should have basic knowledge of Chinese import taxes.