Tannet Group Limited has over 10 year experience about investment in China, the following article is introduce the consumption tax of China, we do hope it can be useful, and help you to start and run the business in China.

Introduction:
Consumption tax is tax payable on the sales value or volume of taxable consumer goods sold in China by units and individuals engaged in the production, subcontracted processing or importation of any of the following 14 items of goods:
cigarettes, alcoholic drinks and alcohol, cosmetics, fine jewellery and precious stones, firecrackers and fireworks, refined oil products, motor vehicle tyres, motorcycles, small motor cars, golf balls and clubs, high-end watches, yachts, disposable wooden chopsticks and wooden floor panels. It is levied on consumer goods on top of VAT.
Consumption tax is included in the transaction price and is only payable on the production, subcontracted processing and importation of taxable consumer goods. Since consumption tax is included in the transaction price, it is not payable in the subsequent stages such as wholesaling and retailing. The tax is ultimately borne by consumers.

(a) Taxpayer
Payers of consumption tax are units and individuals engaged in the production, subcontracted processing and importation of taxable consumer goods.

(b) Taxable Items and Tax Rates
On 21 March 2006, the Ministry of Finance and the State Administration of Taxation (SAT) jointly issued the Circular of the Ministry of Finance and the State Administration of Taxation on Adjustment and Improvement of Consumption Tax Policies (Circular No. 2006/33), with adjustment to items subject to consumption tax, tax rates and related policies taking effect on 1 April. After the adjustment, consumption tax is levied on 14 taxable items at tax rates ranging from 3% to 50%.

(c) Method of Computation
‧ For tax payable by volume, the sales volume is used as the basis:
Tax payable = sales volume x tax amount per unit
‧ For tax payable by value, the sales value is used as the basis:
Tax payable = sales value (or import value) x tax rate
‧ For tax payable under the combination of by volume and by value:
Tax payable = sales volume x tax amount per unit + sales value x tax rate

(d) Tax Liability and Payment Period
In the sale of taxable consumer goods, the consumption tax liability arises on the clay the taxpayer receives full payment for the transaction or obtains a payment voucher for the transaction. In the import of goods, it arises on the day of customs declaration.
The consumption tax payment period may be one clay, three clays, five days, ten days, fifteen days or one month, to be determined by the competent tax authorities based on the amount of consumption tax payable by the taxpayer.

Customs Duty:
Customs duty is levied by Customs on commercial commodities or articles entering or leaving China’s national boundaries or customs territories.

(a) Taxpayer:
Payers of customs duty on commercial commodities are consignees of imports and consignors of exports. The former have to pay import tariffs while the latter have to pay export tariffs. Payers of customs duty on articles include: incoming passengers carrying personal luggage and articles, service attendants on different modes of transport carrying personal articles, owners of gifts and personal articles that enter China through other means, and addressees of incoming personal mail.

(b) Tariff Rates:
China adopts a two—column tariff for imports: a general rate and a preferential rate. The general tariff rate applies to goods from countries and regions that have not signed reciprocal tariff agreements with China, while the preferential tariff rate applies to goods from countries and regions that have signed such agreements with China. The current average import tariff rate of China is 9.9%. For exports, tariffs range between 0% and 20%.

(c) Dutiable Value:
The dutiable value of imported goods in general is their CIF price while the dutiable value of exports is their FOB price.

(d) Method of Computation:
Customs duty payable is calculated by multiplying the dutiable value and quantity of the goods imported or exported by the applicable tax rate or tax amount. The formula for calculating the amount of customs duty payable is as follows:

Duty payable = quantity of taxable import or export * unit dutiable value x applicable tax rate
or
Duty payable = quantity of taxable mi port or export x applicable standard tax amount

(e) Payment of Customs Duty
Taxpayers or their agents should make payment at designated banks within 15 days from the date of issuance of the customs duty payment notice by Customs.

All the information and data above is only for reference, for further information, please feel free to contact us.