Import Procedures

The Chinese importer (agent, distributor, joint-venture partner, or FIE) gathers the documents necessary for importing goods and provide them to Chinese Customs agents. These documents include: the bill of lading, the invoice, the packing list, the customs declaration, the insurance policy, the sale contract and the inspection certificate of the AQSIQ (General Administration of the PRC for Quality Supervision, Inspection, and Quarantine) or other licenses of safety and quality. To reduce customs clearance time, certain companies can- in cases where description, specifications and quantity of import of goods are determined- declare to the customs in advance and present the documents after the imports are dispatched, before the arrival or in the three days which follow the arrival of the goods in a customs surveillance zone. The Customs authorities will examine the goods directly and will release the goods after their arrival.

Customs declarations can be done via the customs site. Exporters must indicate the place of arrival of the goods and they must complete all customs data. Once the data is analysed by the customs, a receipt will be sent, so that the company can complete the cargo of the goods. Custom duties can then be paid by bank transfer.

For more information, please refer to the Chinese Customs Authority.

Specific Import Procedures

The import of food and beverage in China is supervised by multiple government agencies and departments, mainly the State Administration for Market Regulation (SAMR), the National Health Commission of China (NHCC), and the General Administration of Customs of China (GACC). Exporters and Importers of foreign food and beverage must be recorded through the “Registration Systems of Imported Food and Cosmetic Importers and Exporters” or the “Internet + customs platform” of the GACC. Furthermore, the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) requires registrations for the import of cereals and oilseeds and live seafood.  Similarly, the China Food and Drug Administration (CFDA) has issued registration requirements for infant formulae, health food, food for special medical purposes and new requirements for online food trade.

Certain items are prohibited from entering China: arms, counterfeit currencies, documents which are deemed to be detrimental to the political, economic, cultural and moral interests of China, lethal poisons, illicit drugs, disease-carrying animals and plants, foods, medicines, and other articles coming from disease-stricken areas, used garments, local currency, etc.

Distribution channels

China's retail sector offers great opportunities for food product exporters. In 2021, total retail sales of consumer goods in China reached 44,082.3 billion yuan, up by 12.5% over the previous year with an average two-year growth of 3.9%. In December 2021 the retail sales of consumer goods in urban areas was 3.52 trillion yuan (532 bn USD). However, there still are many challenges in selling foreign food products in the retail sector. Demand for imported food and beverage is expected to remain resilient, as consumers  perceive imported products to be safe and of high quality. The major drivers of China's retail growth include rapid urbanisation and an increase in the number of middle class consumers. China's consumers expect their food purchases to be easy and convenient. As a result, electronic commerce (e-Commerce) has become an important tool for businesses in the retail sector to use and to adapt to in order to reach their customers.

Many different business models within the retail industry have emerged recently. Small convenience stores and specialty stores remain the most common retail model. In recent years, however, large retailers are increasing market share as they are able to realise greater efficiencies through better supply chains and wider distribution channels. Furthermore, the industry has undergone many mergers and acquisitions (M&A) which has strengthened the large retailers' position in the market.

Traditional retailers are transitioning to include online components to their business. The era of traditional standalone retail stores is being phased out in China. Offline food retailers include hypermarkets, supermarkets, specialty stores, discount stores, community stores and convenience stores. Online food retailers, who supply food products online and deliver the items to the consumer, are the fastest-growing sector recording record-breaking figures.
In 2021, retail sales of supermarkets increased by 6%, department shops by 11.7% and specialist shops by 12% compared to the previous year. However, the upward trend in China's online retail sales can easily be seen by looking at the 2021 turnover, which reached 198.7 billion USD), an increase of 24.6% over the previous year.

High quality and premium priced food products, including imported food and beverage will remain in demand in the market, although there are some difficulties: high import tariffs, regulations and expensive shipping costs. As a result of globalisation and development, China's younger populations have become accustomed to imported food products being available at retail stores in major cities.

Distribution market players

Mass distribution in China is dominated by large Asian groups, with Chinese distributors taking the most significant market share. According to the USDA Foreign Agricultural Service, the top ten national retailers’ combined sales reached over $88.4 billion in 2019.

Gaoxin Retail semi-annual report for the 2022 fiscal year stated a revenue of 41.534 billion yuan or 6.22 billion USD  (as of September 30, 2021) down 5.0% year-on-year, and net profit of 112 million yuan, down 87.6% year-on-year. CR Vanguard and Lianhua own more than 3,000 shops and have an average turnover of $13.6 billion and $7.8 billion, respectively. Yonghui, is also a major player in China. Among these leading retailers, there are two internationally recognized brands, Walmart and Carrefour. In 2021, Walmart's sales reached 11.43 billion USD.
Convenience stores are widespread and their numbers are increasing in response to a growing number of consumers who are looking to save time and money. The leading chain in terms of outlets is YiJie with more than 27,000. The only international convenience store is 7 eleven.
Moreover, there are five major e-commerce players: Tmall.com is considered the largest, followed by JD.com, VIP.com, Pinduoduo and Suning.

Consumption Taxes

Nature of the Tax

Value added tax (VAT) and Consumption tax

Tax Rate

While the standard rate is 13%, it varies depending on the taxpayer status, type of product and service and type of sector.

Reduced Tax Rate

Goods and services taxable at 3% include certain taxable used goods; consignment goods sold by consignment agencies; certain goods sold by pawnbrokers; specific duty-free items sold by duty-free shops; certain electricity produced by qualified hydroelectric-generating businesses; certain construction materials; certain biological products; tap water (rate applies if the taxpayer chooses simplified computation method with no input tax recovery); certain concrete cement goods sold by general VAT taxpayers; non-academic education services; interest income from agricultural loans provided by Agricultural Development Bank of China and its affiliates; certain rare disease drugs (orphan drugs).

Goods and services taxable at 5% include labour dispatching services and human resource outsourcing services.

Goods and services taxable at 6% include R&D and technology services; information and technology services; culture and creative services; logistics supporting services; authentication and consulting services; radio, film and television services; business-supporting services; other modern services; value-added telecommunication services; loan services; direct financial services; insurance services; financial product trading; cultural and sports services; education and medical services; tourism and entertainment services; catering and accommodation services; daily services; other lifestyle services; sales of intangible assets.

Goods and services taxable at 9% include agricultural products (including grains); tap water; heating; liquefied petroleum gas; natural gas; edible vegetable oil; air conditioning; hot water; coal gas; coal products for household use; food-grade salt; farm machinery; fodder, pesticides; agricultural film; fertilizers; methane gas; dimethyl ether; books; newspapers; magazines; audio-visual products; transportation services; postal services; basic telecommunication services; construction services; sales of immovable properties acquired or developed after 1 May 2016; leasing of immovable properties; transfer of land use rights.

Zero-rated (exempt-with-credit) goods and services include exports of goods (excluding prohibited or restricted exports) and services rendered by domestic entities or individuals to overseas entities and consumed entirely outside the country, including international transportation services, including transportation services for Hong Kong SAR, Macau SAR and Taiwan, China; space transportation services; research and development services; contractual energy performance services; design services; radio, film and television programs (works) production and distribution services; software services; circuit design and test service; information systems services; business process management services; offshore outsourcing services, including information technology outsourcing (ITO), business process outsourcing (BPO) and knowledge process outsourcing (KPO); technology transfer.

Taxpayers that supply items eligible for VAT reduction must book these sales separately. Otherwise, no reduction applies.

Other Consumption Taxes

Consumption tax applies to prescribed nonessential and luxury or resource-intensive goods (including alcohol, luxury cosmetics, fuel oil, jewellery, motorcycles, motor vehicles, petrol, yachts, golf products, luxury watches, disposable wood chopsticks, tobacco, certain cell and coating products), and it mainly affects companies involved in producing or importing these goods. The tax is calculated based on the sales value of the goods, the sales volume or a combination of the two. Exports are exempt.

A tobacco tax is levied on the purchase of tobacco leaves within the country's territory, at the rate of 20% of the purchasing value.

Stamp duties may be levied on specific legal documents (rates between 0.005%-0.1%).

China levies a motor vehicle acquisition tax on the purchase and importation of cars, motorcycles, trams, trailers, carts, and certain types of trucks. The rate is equal to 10% of the taxable consideration. A vehicle and vessel tax is also levied at fixed amounts according to the weight.

A vessel tonnage tax is levied on any vessel entering a port inside the territory of China from overseas, calculated according to the tonnage multiplied by the applicable tax rate that is determined based on the net tonnage and the term of the tonnage tax license.

Corporate Taxes

Company Tax

25%

Tax Rate For Foreign Companies

An enterprise is resident in China if it is established in or if its place of effective management is in China. Effective management is defined as substantial and overall management and control over manufacturing and business operations, human resources, financial and property aspects of the entity. A foreign company will also be subject to tax in China if it has an "establishment" in China or if it derives income from China. The definition of an establishment is broad and includes also independent agents. When a foreign company has an establishment in China, it will be subject to tax on all income effectively connected with that establishment.

Capital Gains Taxation

There is no separate capital gains tax in China; capital gains (and losses) of companies generally are combined with other operating income and taxed at the corporate income rate (25%).

The sale of real estate and net development costs are subject to the land appreciation tax at four bands ranging from 30 to 60% (depending on the percentage of the gain realised).

Main Allowable Deductions and Tax Credits

Generally, all documented expenses, costs and losses in generating taxable income are deductible up to a limit: entertainment expenses are 60% deductible up to 0.5% of total income, advertising (up to 15% of total income, 30% in some cases) and donations (up to 12% of total income; although donations for poverty alleviation in certain areas can be fully deducted). Non-deductible items include dividends, management fees, Enterprise Income Tax (EIT) paid and late tax payment surcharge fees.

A deduction is allowed for the amortisation of intangible assets, including patents, trademarks, copyrights, and land use rights. Intangible assets have to be amortised over a period of at least ten years. Organisational and start-up expenses are tax-deductible fully in the first year of activity. Interest on loans is also tax-deductible (subject to conditions). 200% of the salary expenses paid to handicapped staff are deductible. The tax amortisation value of certain R&D expenses is increased between 175-200%.

Tax losses can normally be carried forward for a maximum of five years starting from the year subsequent to the year in which the loss was incurred, while carryback of losses is not permitted.

Preferential tax treatments in the form of incentives are further granted to new high-technology enterprises (HNTE), companies in special economic zones (SEZ) and pilot free trade zones (FTZ), while exemptions may apply to agriculture, forestry, fishery, software, infrastructure and other specified environment and technology developments.

Other Corporate Taxes

A real estate tax based on the value of the property or rental received is levied annually on land and buildings used for business purposes or leased. The tax rate is 1.2% of the original value of buildings. A tax reduction of 10% to 30% is commonly offered by local governments. Alternatively, tax may be assessed at 12% of the rental value (may be reduced to 4% for the leasing of residential property by individuals).

A deed tax, generally at rates between 3% and 5%, may be levied on the purchase, sale, gift, or exchange of ownership of land use rights or real properties and paid by the transferee/assignee.

An urban and township land-use tax is levied on taxpayers who use land within the area of city, country, township, and mining districts. The due amount depends on the area of land actually occupied multiplied by a fixed amount per square metre determined by the local authorities. The same principle applies to the arable land occupation tax, which is levied on companies and individuals who build houses or carry out non-agricultural construction on arable lands.

The sale of real estate and net development costs (or land use rights) are subject to the Land Appreciation tax at 30 to 60% (depending on the percentage of the gain realised).

Stamp duty (0.005% - 0.1%) is levied on specific legal documents.

The employer contributes around 16% of the basic payroll to the state-administered retirement scheme, as well as to medical insurance, maternity insurance, unemployment insurance, and work-related injury insurance funds (bringing the total to approx. 40% of base monthly salary, with actual rates varying across the country).

An urban construction and maintenance tax is levied on the amount of indirect tax (VAT, consumption tax), at a rate of 7% for urban areas, 5% for county areas, and 1% for other areas. The same calculation base is used for the national (3%) and local educational surcharge taxes (2%) paid on the amount of VAT and consumption tax.

A motor vehicle acquisition tax is levied at 10% of consideration on automobiles, tramcars, trailers, and motorcycles. A vehicle and vessel tax also applies (generally at fixed amounts).

Companies and individuals active in the entertainment and advertising businesses are subject to a cultural business development levy at 3% on the relevant income.

Local authorities levy a resources tax on natural resources, including crude oil, natural gas, coal, salt, raw metallic metals, non-metallic metals, mineral water, carbon dioxide gas, and water (in 10 provinces). This tax is applied on a sales turnover or tonnage/volume basis.

An environmental protection tax (EPT) is levied on enterprises that directly discharge taxable pollutants within the Chinese territory. It is calculated based on the volume of pollutants discharged multiplied by a specific EPT coefficient.

For further information, including information on other common fees, costs or compulsory donations other than taxes that are collected from companies by the Chinese tax authorities, please consult the portal of the State Taxation Administration.

Other Domestic Resources

State Tax Administration

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed

International tax treaties signed by China

Withholding Taxes

Withholding tax rates in China are 10% for dividends, interest and royalties paid to non-resident companies (0% for resident companies). When paid to resident and non-resident individuals, the rate is 20%.
A 6% VAT generally applies to interests and royalties (which could be waived in case of royalties paid for technology transfer).