On April 26 2024, the Standing Committee of the 14th National People's Congress (NPC) approved and announced China's new Tariffs Law. The law is set to take effect on December 1 2024. Alongside this announcement, the State Council's Customs Tariff Commission clarified China’s import and export tariff rates, which will also be implemented on December 1 2024, as part of the law.
The new Tariffs Law, built upon the existing Regulations on Customs Tariffs, consolidates and enhances provisions previously scattered across various announcements and practices. It comprises seven chapters and 72 articles. Many of the updates align practices between customs rules and the corporate income tax (CIT). Some notable changes compared with the current customs regulations include the following:
Enhanced administration of cross-border e-commerce – in response to the rapid growth of cross-border e-commerce, the law designates cross-border e-commerce platforms, logistics companies, and customs declaration firms as tariff withholding agents. These entities may face fines ranging from 50% to three times the amount of unpaid tariffs in cases of underpayment.
Streamlined customs clearance process – the new law separates the release of goods from tariff payments. Taxpayers can now make consolidated tariff payments after several goods declarations, simplifying the customs clearance process and reducing administrative burdens.
Extended period for taxpayers to apply for tax refunds – taxpayers can now apply for tax refunds due to overpaid taxes within three years, compared with the previous one-year limit. This extension, aligned with relevant provisions of the Tax Collection and Administration (TCA) Law, better protects taxpayers’ rights and interests. Additionally, customs authorities now have three years (previously one year) from the date of tariff payment or goods release to chase back taxes. However, there is no time limit for smuggling activities (this is aligned with the TCA’s approach to time limits for tax fraud).
Incorporation of anti-tax avoidance measures – the law specifies that the state may adopt measures such as adjusting tariffs for activities that reduce the amount of tax payable without reasonable commercial purposes. This move aims to strengthen tax compliance and prevent tax evasion, and parallels the CIT general anti-avoidance rule.
Enhanced tariff response measures – in addition to existing measures such as anti-dumping, countervailing, and safeguard measures, the new law introduces provisions stipulating that countries and regions failing to fulfil most favoured nation treatment or tariff preferential treatment clauses in international treaties or agreements with China may face corresponding measures based on the principle of reciprocity.
With the introduction of the new Tariff Law, 13 out of the current 18 tax types in China have now been put on a legislative basis; historically, most Chinese tax types had their basis in State Council regulations, rather than law, and providing a legislative basis for the key tax types has been a major government goal. According to the legislative work plan for 2024 announced by the NPC and the State Council, the draft VAT Law will undergo its third (and final) review in December. Additionally, the draft Consumption Tax Law (i.e., excise duty) and the draft amendment to the TCA Law are expected to be submitted for NPC deliberation this year.
In parallel, the Chinese tax authority's advance tax ruling system has been expanding. Following its launch in Shanghai in December 2023, the tax authorities in Beijing and Maoming (a city in Guangdong province) have also recently begun to implement this system. This expansion should provide greater clarity and certainty to taxpayers for navigating complex business transactions and ensuring compliance.
Though China has not yet issued a comprehensive national framework for the advance tax ruling system, the draft amendments to the TCA Law mention the “advance tax ruling system”, indicating an intention to grant this system legal status at the legislative level, paving the way for more standardised and predictable tax rulings in the future.
