Taxation of export and import of jewellery products in China
There are the following production-related taxes currently in force in China:
- VAT: At present, production VAT is being imposed, though consumption VAT is being introduced in some sectors in the Northeast of China. There are two levels of taxes, namely a base rate of 17% and a low rate of 13%. Precious metal products and minerals that have not undergone processing are taxed at the rate of 13%. Processed stones and other precious metals jewellery are taxed at 17%. In order to simplify the tax administration, the State further decided that small scale producers with annual sales volume of less than one million RMB will pay taxes at the rate of 6%. Small scale wholesalers engaged in the jewellery industry with annual sales below 1.8 million RMB would pay taxes at the rate of 4%.
- Resources Tax: Resources tax is imposed on those units which develop taxable mining products within China. This is a specific tax. For non-industrial and jewellery-grade diamond, resources tax is 10 RMB per carat, while for industrial diamond, it is 2 RMB per tonne.
- Consumption tax: Consumption tax is an indirect tax imposed on consumers of particular consumer goods and it is being levied in China at present on items like cigarette, liquor, cosmetics and jewellery. Several jewellery items are taxed at the rate of 10%. Non-mounted diamond and diamond jewellery, diamond-inlaid precious metal jewellery and gold jewellery are taxed at 5%. There are some indications that the 5% consumption tax on gold jewellery might be revoked in 2004. China Gold Association has proposed to the State Administration of Taxation that the 5% consumption tax on gold jewellery be scrapped. It is reported that SAT has attached great importance to the matter and delivered it to the State Council. Consumption tax was 10% in 1993, which was reduced to 5% in 1994, when the tax burden was transferred from the consumers to the retailers.
- Import: Imported raw materials for jewellery are taxed at a lower rate. For instance, MFN rates for sorted and unsorted natural pearls are respectively 25.8% and 25.7%, non-processed industrial diamond (both natural and synthetic) and diamond powder are free of tax, import tax on non-processed gemstones is 3%. Finished products are taxed at a higher rate. For instance tariffs on precious metal jewellery are 30% (25% under Bangkok Agreement). Rates have been falling since China’s accession to the WTO. Import tariffs for the year 2004 are given at appendix E in Resources section.
- Export: Consumption tax is not imposed on export products. Export tax rebate is granted on export of gemstones (13%), diamond (17%) and natural and artificial pearls (5%).
- Special taxation policies within SDE:
No import VAT/ consumption tax or tariff is levied on imported diamond traded directly within SDE.
Diamond traded within SDE is exempt from VAT and consumption tax.
Domestic diamond, once it enters SDE, is recognized as export, and export rebate is granted while consumption tax is exempted.
Diamond taken out of SDE for sale in the domestic market is taxed.
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