China VAT Tax & Import Duties

Whether buying or selling products and services in China, it is important to consider the taxation system of the world’s fastest-growing economy. What is exempt from tax, what is not and how much products or services are taxed are all important factors. Import duties also play an important role, affecting the speed with which products cross borders.

VAT

• China began implementing VAT in 1984. In January 1994, the country began to enforce the Provisional Regulation of the People’s Republic of China (PRC) on Value Added Tax. This is the system active in China today. VAT is the major source of revenue for the Chinese government and is shared between central and local governments; 75 percent to central and 25 percent to local. Revenue from the value added tax came to 1.88 trillion Yuan RMB in 2009, up 3.8 percent from the year before.

VAT Tiers

• There are three different tiers that decide an item’s rate of VAT. For sales or import of goods and providing processing and repair services, the tax rate is 17 percent. For the sales or import of grain, edible oil, coal gas, natural gas, books, newspapers and magazines, the rate is 13 percent. All exported goods are set at a rate of 0 percent VAT.

VAT Exempt

• Some items are not affected by VAT, including equipment used for scientific research or educational purposes, imported materials and equipment given as a gift or grant by foreign governments or NGOs, contraceptive medicines and devices, items imported by organizations for the exclusive use of the disabled, materials imported for the relief of poverty, and antique books purchased from the public.

Taxpayers

• It states in the Provisional Regulation of the PRC on VAT that value-added tax is to be paid by businesses or individuals who sell merchandise or who provide processing, repairing or assembling services. Said businesses and individuals are also to be taxed on the importing of goods into the People’s Republic.

Import Duties

• Import duties are subject to the specific Harmonized System Code, or HS Code, of the product being imported, the country of origin and the destination. It is important to know the HS code of your product, as if it is wrong it could delay custom clearance. Each product has its own HS Code, although definitions can sometimes be vague. Any Chinese supplier should be able to help you with classification.