How much is VAT in China?
The standard VAT rate in China is 13%. It applies to most goods and services. The two reduced VAT rates are 9% and 6%. China also has some zero-rated goods, the sale of which must still be reported on your VAT return, even though no VAT is charged.
The first reduced VAT rate (9%) applies to retail, entertainment, hotels, restaurants and catering services, real estate and construction, postal service, transport and logistics.
The second reduced VAT rate (6%) applies to financial services and insurance, IT, technology, consulting, city maintenance and construction.
Chinese zero-rated goods and services include exported goods and some exported services.
What is a VAT rate?
VAT (value added tax) is a type of consumption tax. The Chinese government applies it on the sale of goods and services.
VAT isn’t paid by businesses — instead, it’s charged to consumers in the price of goods, and collected by businesses, making it an indirect tax. Businesses are then responsible for reporting it to the government.
How to work out VAT in China.
Total price including VAT
To work out the total price at the standard rate of VAT (13%), multiply the original price by 1.13. For the first reduced VAT rate (9%), multiply the original price by 1.09. For the second reduced VAT rate (6%), multiply the original price by 1.06.
Total price excluding VAT
You can calculate the total price excluding the standard VAT rate (13%) by dividing the original price by 1.13. For the first reduced VAT rate (9%), divide the original price by 1.09. For the second reduced VAT rate (6%), divide the original price by 1.06.
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How does VAT work?
VAT is collected at each point in the production of goods — every time value is added and a sale is made. This is what gives VAT its name — value-added tax. It’s designed to be paid by the consumer at the end. Here’s an example:
- A supplier sells a badminton racket to a shop for $120. They owe $20 VAT to the government.
- The shop pays $120 but can claim the $20 back from the government, so the shop doesn’t pay the VAT.
- The shop sells the racket to the customer for $220. The VAT is $44 which the customer, as the end-user, pays in full to the shop.
- Together with the reclaimable $20 VAT, the shop will end up paying $24 to the government.
Tax-free shopping - VAT for travellers.
So, you’ve done some shopping abroad, and paid a healthy amount of money for VAT. The good thing is you can often get the amount refunded once you’ve returned home.
For example, European Union residents can get a VAT refund on goods bought in Singapore from a retailer that offers tax-free shopping.
The conditions for a VAT refund are different in every country and should be checked according to your destination — there’s usually a minimum purchase amount, and some exceptions to be considered.
If you’re planning on visiting any of these countries, have a look at their rules for tax-free shopping. And if you’d like to save even more money, don’t miss out on the travel money debit card from Wise, and spend in shops or online at the real exchange rate.
When you’ve visited China, you’ll be able to get a VAT refund on items bought if:
- You live outside China and are going back home.
- You’ve spent a minimum of 500 CNY in any tax-free store the same day.
There are multiple ways of receiving the refund — either get paid immediately at a refund booth at the airport or send the approved form to a refund company.
How to get a VAT refund in 3 simple steps?
Get a Tax Refund Application Form from the retailer. You might also be asked to show your passport to check that you’re eligible.
At customs, present your passport, VAT form(s), VAT invoice(s) and the tax-free goods.
If all the criteria is met, customs will approve your form. You’ll get a signed form that allows you to receive the refund.
FAQ about VAT rate.
Complying with VAT in China means following the Chinese Value Added Tax regime.
This includes preparing the correct invoices, keeping the necessary records of transactions for a period of 10 years and using legitimate foreign currency rates.
As a VAT-registered business in China:
- You have to charge VAT on all taxable goods and services you sell.
- You must file a VAT return every 3 months, even if you have no VAT to report.
- You can reclaim the VAT you paid for goods and services from other VAT-registered businesses.
When reporting your VAT, keep in mind, you must pay VAT even if you didn’t charge it from the customer — the price that you charge has the VAT included.
There are a few goods and services in China that are exempt from VAT and are not taxable. They include:
- Agricultural products
- Contraceptive drugs and devices
- Antique books
VAT-exempt means the goods and services are outside the VAT system — you don’t need to charge any VAT on them nor report them on your VAT return. Even though you don’t pay VAT on zero-rated supplies, they are still taxable and must be reported on your VAT return. You can also reclaim the input VAT that you paid to other businesses when producing your zero-rated goods.