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China Expands Pilot Scheme for Selective Levying of Tariffs on Domestic Sales

The Ministry of Finance, General Administration of Customs and State Administration of Taxation recently issued a circular on expanding the pilot scheme for the selective levying of tariffs on the domestic sale of goods with effect from 1 September 2016.

According to this circular, the policy of the selective levying of tariffs on domestic sales will be expanded to the special customs supervision areas (except bonded zones and bonded logistics parks) in the provinces (municipalities) where the Tianjin, Shanghai, Fujian and Guangdong Pilot Free Trade Zones are located, as well as the five special customs supervision areas of Xinzheng Comprehensive Bonded Zone in Henan, Wuhan Export Processing Zone in Hubei, Xiyong Comprehensive Bonded Zone in Chongqing, Chengdu High-Tech Comprehensive Bonded Zone in Sichuan and Xi’an Export Processing Zone in Shaanxi.

Pilot Enterprises Free to Choose Tariff Payment Method

The selective levying of tariffs on domestic sales means levying tariffs, import VAT and consumption tax on the goods produced, processed and sold domestically through the “second line” (areas connecting the pilot free trade zones and the domestic areas) by enterprises in the special customs supervision areas upon application by enterprises according to the corresponding imported materials or parts or according to the actual goods declared for inspection. An enterprise must also pay interest on the deferred tariff payment if it opts to pay tariffs on the imported materials or parts.

This policy is now practised in the Shanghai, Guangdong, Tianjin and Fujian Pilot Free Trade Zones and has produced positive results.

As part of the first batch of preferential measures adopted by the Tianjin Pilot Free Trade Zone since its establishment about a year ago, this system has effectively helped enterprises cut costs, improve productivity and expand the domestic market, according to the information given in the website of the General Administration of Customs.

The Tianjin Customs has steadily pushed forward the system of selective tariff levying since the establishment of the Tianjin Pilot Free Trade Zone. In the early stage, it conducted investigations and studies on the establishment of systems and guidelines, management of information systems, verification of domestic selling price and other aspects, answered queries from enterprises on this policy, and guided and followed enterprises in the pilot areas in their implementation of this system. The system of verification by two persons was also adopted for the first review of application and price verification for selective tariff levying to ensure that the system was implemented strictly according to regulations in an effective and orderly manner.

The Tianjin Customs has approved 198 applications for selective tariff levying and helped enterprises save RMB456,100 in tariff payment since the implementation of this system a year ago.

Content provided by Picture: HKTDC Research
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