When importing into China, the rates imposed can vary depending on some key factors, which are assessed when calculating duty and VAT rates.
Understand the fundamentals of Chinese import tax calculation
There are many different variables to account for, the most common influencers being:
- Product category & Use/function (HS codes)
- Relevant Import quotas
- Country of export
- Materials/Ingredients used - This will identify if there are any potentially hazardous or restricted materials present
China import policies can be incredibly strict, with reports of importers being prosecuted for tax evasion even years after import due to incorrect HS codes - so it's important to be clear and transparent when identifying your products.
There are many calculations to consider, if we were importing wine into China, the most relevant would be:
CIF (Cost, Insurance and Freight) x Duty rate
((CIF + Import duty)/(1 – Consumption rate))* Consumption rate
*Only applicable to certain product categories including alcohol,cigarettes, cosmetics, jewellery, vehicles etc.
(Customs dutiable value + Tariff + Consumption) x VAT rate
A worked example
Let's demonstrate how this is applied to a real life situation - importing wine into China.
If you're you're importing 1,000 cases of wine with a total CIF value of 500,000RMB, the following rates apply
- Duty rate - 14%
- VAT rate - 17%
- Consumption rate - 10%
With that key information, we can now work out, using the above formulas:
CIF (500,000) x Tariff rate (14%)
((CIF [500,000] + Import Duty [70,000] )/(1 – Consumption rate [10%])) x Consumption rate [10%]
(CIF [500,000] + Import Duty [70,000] + Consumption [63,333.33]) x VAT rate [17%]
Depending on the product category, rates and other taxes can vary, so be sure to calculate for each product be confident all the costs are correct.
Why is this so important?
It quite literally, pays to understand all your costs up front.
It's impossible to set correct pricing and build a sustainable business model for China without clearly understanding the full cost of importing into the country. It's wise to go one step further and figure out your full landed cost before selling in China, to avoid any nasty surprises.
We work with a wide range of businesses, helping them understand all this in full with an Import Feasibility study, to ensure all products can be safely imported alongside a full understanding of costs to guide pricing and selection of the most appropriate fulfillment methods