China’s cancellation of the export tax rebate for aluminum will be officially implemented on December 1, 2024. China is obviously the world’s largest aluminum producer and exporter and has gained a lot of benefits from exporting aluminum. So why is it canceling the export tax rebate now?
China canceled the export tax rebate on aluminum mainly because some countries were dissatisfied with the low price of Chinese aluminum products. The actual situation is that because the production process of aluminum is energy-intensive, canceling the export tax rebate can reduce the overproduction and waste of aluminum and reduce trade friction. In addition, canceling the export tax rebate on aluminum can reduce the export volume of aluminum, thereby adjusting the domestic market demand for aluminum and stabilizing the price of aluminum.
So, how should I deal with China’s policy of canceling aluminum tax rebates? What do I need to know about aluminum tax rebates? How to find the most suitable and reliable supplier in China……
What Does The Cancellation Of The 13% Export Tax Rebate Rate For Aluminum Mean?
The cancelled aluminum export tax rebate rate of 13% means that Chinese aluminum exporters used to be able to obtain a tax rebate of 13% of the value of their export products when exporting their products. But now the Chinese government has decided to cancel this tax rebate policy, which means that aluminum exporters will no longer enjoy this tax rebate, resulting in an increase in export costs (increase in aluminum export prices) and affecting exporters’ profits.
The export tax rebate rate is not for all aluminum but for specific types. It mainly includes aluminum alloy profiles, aluminum plastic composite panels, aluminum alloy plates/strips/foils, aluminum tubes, aluminum foil with or without backing, etc. Some aluminum semi-finished products will not be affected by the tax rebate, such as aluminum foil containers, aluminum pots, aluminum trays, etc. If you are not sure whether your imported products are subject to the tax rebate cancellation, you can ask your supplier directly.
How to Calculate China’s Aluminum Tax Rebate Cancellation?
Calculating the tax rebate cancellation for aluminum in China requires considering multiple factors, including the tax rebate rate, the type of aluminum, the export volume, the production cost, etc. Here are simple calculation steps:
- Clarify the tax rebate rate
The tax rebate rate refers to a certain percentage of the value-added tax (VAT) paid by the government to the exporter. For example, if the tax rebate rate is 13%, it means that when aluminum products are exported, the exporter can refund the equivalent of 13% of the VAT. - Types of aluminum products and export methods
Different types of aluminum (such as aluminum ingots, aluminum alloys, aluminum profiles, etc.) have different tax rebate rates. Therefore, when calculating, it is necessary to clarify which type of aluminum product is being taxed.
Aluminum ingots: Generally, as a basic raw material, the tax rebate policy may involve a lower tax rebate ratio.
Aluminum alloys or processed aluminum products: These high-value-added products may have a higher tax rebate ratio. - Calculate the export price before tax rebate
Assume that the export price of a certain type of aluminum product is US$5,000 per ton. - Calculate the amount of tax refund
The cancellation of tax refund means that exporters will no longer receive the VAT refunded, so they need to estimate the amount of tax refund lost based on the previous tax refund rate.
For example, if the tax refund rate is 13% and the value of the exported product is US$5,000, the tax refund amount calculation formula is:
Tax refund amount = export price × tax refund rate
Tax refund amount = US$5,000 × 13% = US$650
This means that for aluminum products that originally cost US$5,000 per ton, exporters will now lose a tax refund of US$650. - Calculate the impact of the cancellation of tax refund
If companies decide to pass on the cost of the cancellation of tax refunds to customers, they may need to increase product prices by about 13%. - Consider value-added tax (VAT)
China’s export tax rebates are usually refunded for the VAT that has already been paid. Exporters usually pay VAT during the production or sale of aluminum, and the cancellation of the tax rebate means that this part of the tax will no longer be refunded. Therefore, when calculating the impact of the cancellation of the tax rebate on the company, the impact of VAT needs to be taken into account. - Final calculation
For example, assume that an aluminum production company exports 10,000 tons of aluminum per year, the export price of each ton of aluminum is US$5,000, and the tax rebate rate is 13%. After the cancellation of the tax rebate, the amount of tax rebate lost by the enterprise each year can be calculated by the following formula:
Annual loss of tax rebate = annual export volume × export price of aluminum per ton × tax rebate rate
Annual loss of tax rebate = 10,000 tons × $5,000/ton × 13% = $6,500,000
In summary, after the cancellation of the tax rebate, enterprises will lose about 6.5 million US dollars in tax rebate funds each year. This money may need to be compensated by raising export prices, increasing sales volume, or reducing production costs.
How Much Tax Will I Pay If I Import From China?
The amount of tax you need to pay when importing goods from China depends on a variety of factors, including the type of product, value, destination country, and applicable international trade agreements.
Tariffs are taxes that governments impose on imported goods. The rate varies depending on how the product is classified under the Harmonized System (HS) code.
Steps to calculate tariffs:
| Identify the HS code: Each product has a unique code under the Harmonized System that is used to classify goods for customs purposes. The HS code determines the applicable tariff rate. Tariff rates: Customs authorities in your country have tariff rates for different products. Customs value refers to the cost, insurance, and freight (CIF) value of the product, which includes: Cost: The price you pay for the goods. Insurance: The cost of insurance to transport the goods. Freight: The cost of shipping from China to the destination country. Tariff rates are applied to the CIF value. |
Example:
If the tariff rate is 10% and the CIF value of the goods you import is $1,000, the tariff is:
Tariff = CIF price × tariff rate
Tariff = 1000 × 10% = $100
So you pay $100 in tariff.
Steps to calculate VAT/GST:
| VAT/GST rate: The VAT or GST rate for your country and product type. VAT/GST base: The base for calculating VAT or GST is usually the CIF value plus tariff. |
Example:
If the VAT rate is 20%, and the CIF value of your goods is $1,000 with a customs duty of $100, the total base for VAT calculation would be:
VAT Base=CIF Value+Customs Duty =1000+100=1100USD
The VAT due would be:
VAT=1100×20%=220USD
So, you would pay $220 in VA
Other Fees And Taxes
In addition to customs duties and VAT/GST, there could be other fees depending on your country’s regulations and the type of product. Some of these include:
- Handling Fees: Customs may charge a fee for processing your shipment.
- Customs Broker Fees: If you use a customs broker to help clear your goods, they may charge a service fee.
- Excise Taxes: For certain products like alcohol, tobacco, and luxury items, additional excise taxes may apply.
- Import Licenses or Permits: Some products require import licenses, which may incur additional costs.
Free Trade Agreements (FTAs) and Duty Reductions
If your country has a Free Trade Agreement (FTA) with China, you may be eligible for reduced or zero customs duties on certain goods. For example, under the China-Australia Free Trade Agreement (ChAFTA), certain products are eligible for reduced tariffs. You may need to provide specific documentation (like a certificate of origin) to benefit from these agreements.
Example of Total Taxes and Fees
Let’s break down an example scenario:
- CIF Value of Goods: $2,000
- Customs Duty: 10% (on CIF value) = $200
- VAT/GST: 20% (on CIF value + duty) = 20% of ($2,000 + $200) = $440
- Total Taxes and Fees = Customs Duty + VAT = $200 + $440 = $640
So, in this case, you would pay $640 in taxes and fees in addition to the initial cost of your goods.
How to Find Specific Rates and Fees
To determine the exact taxes and duties you will pay, you need to:
- Check the HS Code for your product and find the applicable duty rate.
- Research VAT/GST rates in your country.
- Look for trade agreements that might apply (such as FTAs).
- Contact your local customs authority for up-to-date information or consult a customs broker if you’re unsure about the specifics.
Each country’s tax code and customs regulations differ, so it’s crucial to check the details for your location.
Can You Claim A VAT Refund From China?
If you are a Chinese exporter, even if China cancels the export tax rebate for aluminum products, you can still apply for a VAT refund in certain circumstances. If your company has paid VAT to the exporter before the cancellation of the tax rebate and your aluminum products have been exported, then you can apply for a VAT refund. In addition, China may set a transition period after the policy is implemented, during which you can still apply for a tax refund according to the previous tax rebate policy.
If you are a foreign importer and have paid VAT when importing aluminum products, then if you export these aluminum products to other countries, you are eligible to apply for a VAT refund.
How to find the most suitable and reliable supplier in China?
After China canceled the tax rebate for aluminum products, it has become particularly important to find a reliable aluminum product supplier. Changes in tax policies will affect production costs and export prices, so choosing a reputable and stable supplier can help you reduce potential risks and ensure the smooth operation of your business.
Focus on Tax Compliance
Make sure your suppliers are up to date with the latest tax policies, especially changes in value-added tax (VAT) and export tax rebates. You can ask your suppliers to provide recent tax compliance certificates or relevant tax records. Choose suppliers with legal business licenses and export qualifications. You can verify their company registration information and tax registration by checking China’s National Enterprise Credit Information Publicity System.
Choose Experienced
Suppliers with a long-term stable export record will be more experienced in dealing with policy changes and help you deal with related VAT or tax refund issues. You can learn about their product quality, delivery punctuality, and tax performance by visiting the supplier’s official website, third-party platforms, or cooperation cases with other customers.
Production and Quality
If you have time, visit the supplier’s factory in person to check its production equipment and production process. Ask the supplier to provide product quality certification, such as ISO 9001, ISO 14001 and other international standard certifications.
Negotiate Carefully
China’s cancellation of tax rebates for aluminum products will lead to changes in production and trade processes. A good supplier will be able to work with you to explore solutions, such as adjusting prices, optimizing production processes, or suggesting new payment methods, to ease the increased tax burden.
Before signing a contract, make sure the contract terms are clear, including price, delivery time, tax rebate issues, tax compliance, etc., to avoid disputes caused by changes in tax policies.
Search In Multiple Ways
In addition to contacting suppliers directly, you can also find reliable aluminum product suppliers through third-party platforms and resources.
B2B platform: Through B2B platforms such as Alibaba, Made-in-China.com, and Global Sources, you can find a large number of aluminum product suppliers and view their customer reviews, certifications, and company information.
Participating in professional exhibitions and trade fairs in the aluminum industry is a good way to find high-quality suppliers. These events usually gather a large number of high-quality suppliers, and you can get to know their products and services face to face and establish a more direct cooperative relationship.