Malaysia Exporting to China: Import Duties and Taxes

Categories of Duties and Taxes When exporting goods from Malaysia to China, there are three primary types of import duty that you should be aware of:

1️⃣ Customs duty

2️⃣ Value-Added Tax (VAT)

3️⃣ Consumption Tax (CT)

The exact tax rate is contingent on the nature of the commodities you’re exporting, and there may be additional taxes levied on your goods. Nonetheless, a standard system is typically used to calculate the duties and taxes incurred.

Customs Duty

Similar to Malaysia, China calculates its payable customs duty based on ad valorem rates or in accordance with the quantity of the goods transported.

The type of custom duty applied is determined by the country of origin of the shipment and the type of commodities.

 

So, what are the Duties Included in Customs Duties?

General duty

Being a member of the MFN, China subjects shipments entering the country from most nations to the tariff rates established under the MFN treatment.

Whereas goods from countries or territories that do not have agreements with China, or of unknown origin, are subject to the general import duty.

 

Most Favoured Nation (MFN) duty

MFN duty refers to the rates that nations commit to apply with other members of the World Trade Organisation, unless there is a specific trade agreement between them.

MFN duty is typically applied to the following:

1. Goods imported to China from WTO member countries;
2. Goods originating from countries or territories that have concluded bilateral trade agreements providing MFN treatment with China; and
3. Goods originating from China.

The Regional Comprehensive Economic Partnership (RCEP) is the world’s largest free-trade bloc and members will benefit from preferential trade and tax advantages with China such as the reduced MFN import tax rates.

As a signatory state of the RCEP, Malaysia will also benefit from low import fees for relevant exports to China.

 

Conventional duty

Conventional duty rates are applied to goods shipped to China from countries or territories that have regional trade agreements containing preferential provisions on import tax rates.

 

Special preferential duty

The import fees payable under the special preferential duty are generally lower than the MFN or conventional duty rates. They are typically levied on imported goods originating from countries or territories that have trade agreements with China containing special preferential duty provisions.

 

Tariff Rate Quota (TRQ) duty

China’s TRQ rates apply to the following category of goods below:

Sugar, Wool, Wheat, Rice, Corn, Cotton, Fertiliser

Under the TRQ implementation, goods imported within the quota are subject to a lower customs tariff rate while those exceeding the quota are charged with higher rates.

 

Temporary duty

According to market trends and forecasts, China also do implement temporary duty rates to stimulate imports and meet increasing demands. For instance, at the beginning of the year, China increased the tariff rates on pork imports when domestic prices significantly rose.

 

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Value-Added Tax (VAT) 

Unlike the Customs Duties above, VAT is imposed on imports from any region into China. The VAT rate in China is 13%, which is applicable to all taxable commodities with the exception of agricultural and utility items. For these specific items, a reduced VAT rate of 9% is applied instead.

In this scenario, we will make an example.

You are importing tea bags into China valued at CNY 1550. The VAT rate of 13% will be imposed for it.

CNY 1550 x 13% = CNY 201.5

Consumption Tax

Consumption Tax (CT) is levied on businesses that produce and import taxable products for processing on a consignment basis or for sale. These include items that could be detrimental to health such as tobacco or alcohol, luxury or high-end items like jewellery or cosmetics, and vehicles such as cars. For these goods, the CT rate fluctuates based on the product type. The computation of consumption tax can be performed using either the ad valorem method, quantity-based method, or the compound tax method.

The formulas to calculate the consumption tax are as follows:

• Ad valorem method

Consumption Tax Payable = Taxable Sales Amount × Tax Rate

• Quantity-based method

Consumption Tax Payable = Taxable Sales Quantity × Tax Amount per Unit

• Compound tax method

Consumption Tax Payable = Taxable Sales Amount × Tax Rate + Taxable Sales Quantity × Tax Amount per Unit

Another example, if you are making an import of tobacco products, you will be imposed with a taxation rate of 36% for CT itself. If the value determined for the product is CNY 3000 and to be imposed with 36% of CT,

CNY 3000 x 36% = CNY 1080

 

Additional Import Taxes

In addition to the ones mentioned above, there are several other types of duties to consider when shipping to China. For example, the Cross Border e-Commerce import tax applies to:

Goods purchased from merchants registered within China’s cross border e-commerce network; and

Goods bought from foreign merchants and shipped by a courier company that can provide a commercial invoice, airway bill, proof of payment, and that can legally take responsibility for the import.

 

Duties and Taxes Threshold

China has an import de minimus value of CNY 300. Any imported goods exceeding this threshold are subject to duties and taxes.

 

Duties and Taxes Exemption

China grants duty exemption on duties and taxes below the de minimus value of CNY 300.

Furthermore, Malaysia has a Free Trade Agreement with China under the ASEAN-China FTA (ACFTA). Through ACFTA, most imports from Malaysia are exempt from customs duty.

 

Payment Method for Duties and Taxes

Payment of Duties and Taxes on imports into China can be made online through the China International Trade Single Window Website.

The China International Trade Single Window is a comprehensive website for importers and exporters to conduct customs-related transactions.

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