A Complete Guide to Tax Calculation Under China’s New Tax Policy
The complexity of calculating tax under China's new import tax policy has brought confusion to overseas sellers. To help outsiders get a clearer understanding of the tax policy, Azoya creates a complete guide on calculating the tax.
by Azoya
China has recently introduced a new import tax policy to plug the loopholes and regain control of its loosely regulated cross border eCommerce market. The new policy stipulates that consumers purchasing goods imported under both the direct shipping model and the bonded warehouse model need to pay import taxes including tariffs, import value-added tax (VAT), and consumer tax (if applicable).
However, the UPU shipping route and personal parcel shipping route remain immune to the policy change, which means both the change of tax rate and “positive list” will not affect these two shipping routes. The tax calculation process is different accordingly.
The complexity of calculating the tax has brought confusion to overseas sellers. To help outsiders get a clearer understanding of the tax policy, Azoya creates a complete guide on calculating tax under new tax policy.
Bounded warehouse model (B2B2C) and B2C direct shipping model:
If the calculated duty paid value (DPV) of a parcel is under 2, 000 Yuan, and the total duty paid value (DPV) of the products bought by one person within one year is under 20, 000 Yuan, then the tax required to pay is:
Tariff = 0
VAT = (DPV + Tariff + Consumption Tax) * VAT rate * 70%
Consumption Tax = (DPV + Tariff) * Consumption Tax Rate/ (1- Consumption Tax Rate) * 70%
Note:
In China, the VAT rate is 17% and the consumption tax rate is 30%. The new import tax policy requires 70% of domestic VAT and consumption tax.
Consumption Tax is only applicable to some high-end luxury items, such as cigarette, wine, watch, and golf equipment.
If the calculated DPV of a parcel is above 2, 000 Yuan, or the total DPV of the products bought by one person within one year is above 20, 000 Yuan, then the tax required to pay is:
Tariff = DPV * Tariff Rate (depending on different category)
VAT = (DPV + Tariff + Consumption Tax) * VAT rate
Consumption Tax = (DPV + Tariff) * Consumption Tax Rate/ (1- Consumption Tax Rate)
Note: Under this scenario, there’s no 30% of discount for VAT.
UPU shipping and personal parcel shipping:
There’re 3 tiers of postal tax rate: 15%, 30%, 60%.
The tax is called postal tax, designed for non-trade inbound personal parcels. UPU shipping route does not require all parcels to be taxed, only parcels being chosen in random check will be taxed. Due to a short of manpower, the odds being chosen is fairly low.
15% is mainly applicable for food, furniture and toys products.
30% is applicable for sports equipment (golf equipment excluded), Textile products and the products that are not covered by 15% and 60% tax rate tiers.
60% is applicable for those high-end consumer goods, such as cigarette, wine, jewelry, watches, golf equipment and cosmetics.
Note: Under B2B2C and B2C direct shipping model, the tax is calculated based on duty paid value plus shipping fee, while under UPU and personal parcel shipping model, no shipping fee, and DPV are involved.