China’s Import-Export Taxes and Duties

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China imposes import export taxes on certain goods to regulate its foreign trade and protect its domestic industries. Import and export taxes are charges imposed by governments on goods that are traded internationally. In China, these taxes are essential for regulating trade, protecting domestic industries, and generating revenue for the government. The Chinese government may set different tax rates for different types of goods, based on factors such as the product’s value, its country of origin, and its intended use. In general, the tax rates for imported goods are designed to regulate the import of certain products, protect domestic industries, and generate revenue for the government.

What are Import Taxes in China?

Import tax in China, also known as customs duty, is a tax that is imposed by the Chinese government on goods that are imported into the country. It is calculated as a percentage of the product’s value and varies depending on the type of product and its country of origin.

Some countries, according to the needs of political and economic relations, will apply different tax rates to the same goods from different countries, thus forming a kind of differential treatment. If this differential treatment is taken as the standard, import duties can be divided into ordinary duty, most-favored-nation duty, preferential duty, and general preferential duty.

what is import tax in China

What Are The Custom Duties of Import In China?

There are different types of import taxes and tariffs in China to achieve various economic and trade-related goals. These are explained in detail below. 

Most Favored Nation (MFN) 

This is the basic import tax that applies to goods from most countries that have a trade relationship with China. The rate of this tariff is set out in the Customs Tariff Implementation Plan, which is revised annually by the Chinese government. The MFN tariff is applied to goods regardless of their country of origin, and it is the default tariff rate for most products unless a preferential tariff rate or an exemption applies.

Preferential tariff

This is a reduced import tax rate that may apply to goods imported from countries with which China has a preferential trade agreement. The specific products and countries that are eligible for preferential tariffs can vary depending on the terms of the trade agreements in place.

Anti-dumping duty

 It is an additional import tax that can be charged on products that are sold in China at a price lower than their normal value in the country of origin. The aim is to prevent foreign companies from flooding the Chinese market with cheap products and hurting domestic industries.

Countervailing duty (CVD)

This is an additional import tax that can be levied on products that are subsidized by the foreign government. The aim is to level the playing field by countering the unfair advantage that subsidies give to foreign companies. Countervailing duty is typically imposed on goods that are subject to anti-dumping investigations, and it is calculated based on the amount of subsidy received by the foreign company. The amount of CVD varies depending on the product and the country of origin, and it is usually set at a rate equal to the amount of the subsidy. The Chinese government publishes a list of countervailing duty rates for different products and countries.

Value-added tax (VAT):

 This is a tax that is imposed on the value added to goods at each stage of production, distribution, and sale in China.

The specific import taxes that apply to a particular product depending on its type and country of origin, as well as any applicable trade agreements and regulations. The Chinese government publishes tariff schedules that outline the specific tax rates for different categories of goods and countries.

Consumption Tax For Imported Goods

Consumption tax is a tax that is imposed on certain goods that are consumed within China. This tax applies to both domestically produced goods and imported goods. Check the table below for details of these products. 

Goods Category Products
Tobacco productsCigarettes, cigars, and other tobacco products
Alcoholic beveragesWine, beer, and other alcoholic beverages
High-end luxury goodsExpensive watches, jewelry, yachts, private planes
Non-renewable resourcesCoal, crude oil, and natural gas

Note that the exact tax rates and thresholds may vary depending on the specific goods and their classification. The consumption tax rate in China can be classified into two forms: the proportional tax rate and the fixed tax rate. The selection of the appropriate form depends on the characteristics of the taxable items.

What are Export Taxes in China?

The export tax is the tariff levied on exporters by the customs of one country when its commodities are exported to foreign countries. Export taxes, also known as export tariffs, are taxes imposed by the Chinese government on certain goods that are exported out of the country.

These taxes are usually expressed as a percentage of the value of the goods being exported and are designed to regulate the export of certain products and promote domestic industries.

The Chinese government may impose export taxes on certain goods for a variety of reasons, such as encouraging the export of high-value goods while discouraging the export of raw materials, promoting the development of certain industries, or maintaining a balance of trade with other countries.

What are the Types of export taxes in China?

China imposes various types of export taxes on certain goods that are exported out of the country. Here are some of the most common types of export taxes in China:

Ad valorem tax

 This is a tax based on the value of the exported goods, calculated as a percentage of the FOB (Free on Board) value. This tax is calculated as a percentage of the customs value of the goods, which includes the price paid for the goods, any commissions, packing costs, and insurance fees. It’s worth noting that not all products are subject to ad valorem tax and that specific products may have different tax rates or be exempt from export taxes altogether.

Specific tax

This is a fixed tax levied on a specific unit of exported goods, such as a certain weight or volume. The tax amount is determined by multiplying the quantity of the exported product by the tax rate per unit of measurement, such as per kilogram, per liter, or per piece. This means that the tax rate remains the same regardless of the product’s value or price. Specific taxes are commonly applied to commodities such as crude oil, coal, and iron ore. Specific tax rates can vary depending on the type of product being exported. 

Compound tax

This is a combination of ad valorem and specific taxes, where both a percentage of the FOB value and a fixed amount are used to calculate the tax. In other words, Compound tax combines both ad valorem tax and specific tax, meaning that both a percentage of the value of the goods and a fixed amount per unit are used to calculate the total tax. For example, if the compound tax rate for a certain product is 5%, and the product has a customs value of $1,000 and a weight of 100 kg, the calculation would be as follows:

Ad valorem tax: $1,000 x 5% = $50

Specific tax: 100 kg x $0.50/kg = $50

Total compound tax = $50 + $50 = $100

Value-added tax (VAT) rebate

 In some cases, China may refund the VAT paid on exported goods, effectively providing a tax rebate. This is done to encourage the export of certain products and promote international trade. 

The amount of VAT rebate available for exported goods varies depending on the product type and the tax rate paid on the inputs used in its production. For example, the VAT rebate for exported goods ranges from 0% to 17% for different product categories. The rebate amount is calculated based on the difference between the VAT paid on inputs and the VAT collected on exports. 

Resource tax

Resource tax is a type of tax that is applied to the extraction, production, and export of natural resources in China. This tax is charged on businesses that engage in the extraction or production of resources like crude oil, natural gas, coal, metals, and minerals, as well as on companies that export these resources.

The resource tax in China is calculated based on the volume or weight of the resources being extracted, produced, or exported, as well as on the prevailing market prices for these resources.

The Chinese government determines the tax rates for various resources based on the environmental impact of extraction or production as well as the economic value of these resources.

 Recent changes to China’s import export taxes as of 2023?

In order to balance domestic supply and demand, the Chinese government has made several changes to the import-export tariffs for 2023, as recently announced by the State Council. These changes involve exempting key medical goods from tariffs, raising tariffs on certain commodities to support domestic industries, and introducing new tax items.

As part of its efforts to facilitate high-quality market opening, China has announced that it will apply conventional tariff rates to specific goods originating from 29 countries and regions in 2023, in accordance with its 19 free trade agreements (FTAs), which include the RCEP. 

 Free Trade Zones in China?

Free Trade Zones (FTZs) in China are designated areas that provide tax incentives and streamlined regulatory procedures to promote foreign investment, trade, and economic development. There are currently 21 FTZs in China, which were established in 2013 as a way to open up the Chinese economy and attract more foreign investment. There are many different areas in China. To find more details, please visit our blog about free trade zones in China. The FTZs provide a range of benefits, including:

  • Tax incentives: Companies operating in FTZs may be eligible for reduced or waived import and export taxes, value-added taxes (VAT), and other taxes.
  • Streamlined customs procedures: The FTZs have simplified customs procedures, making it easier for companies to import and export goods.
  • Investment liberalization: The FTZs allow for greater foreign investment, with fewer restrictions on foreign ownership and more liberalized investment policies.
  • Financial reform: The FTZs have implemented financial reforms, such as interest rate liberalization and greater currency convertibility, to promote financial innovation and investment.
  • Trade facilitation: The FTZs provide a platform for companies to test new business models, products, and services, and to engage in cross-border e-commerce.

Overall, the FTZs in China have been successful in attracting foreign investment, promoting trade, and facilitating economic development. They have also served as a testing ground for economic reforms and policy innovations that may eventually be implemented on a wider scale throughout China.

What is China’s import and export licensing framework?

To trade goods with China, trading companies must possess appropriate import and/or export licenses, depending on the type of goods being traded. Although China has an automatic licensing system for most goods, certain items are prohibited or restricted, which require licenses or quotas for monitoring purposes. Every year, the Ministry of Commerce (MOFCOM) and the General Administration of Customs (GAC) release catalogs of goods that require automatic import licensing or import licensing and periodically release catalogs of goods that are prohibited from being imported.

Conclusion

China uses import and export taxes to control foreign trade, support its local businesses, and raise money. Import taxes depend on various factors such as the product’s value, where it comes from, and how it will be used. These taxes can include things like customs duties, value-added tax, consumption tax, anti-dumping duties, and countervailing duties. Export taxes are used to promote specific industries and can be based on the product’s value, quantity, or a combination of both. 

China has made changes to its import and export tariffs for 2023, including exempting key medical goods and applying conventional tariff rates to specific goods originating from some countries and regions. Free trade zones in China provide tax incentives and streamlined procedures to promote foreign investment and economic development. To trade goods with China, trading companies must possess appropriate import and/or export licenses. 

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