Exporting – Taxes, duty and customs considerations to China and Russia
With our dedication to simplifying duties and VAT calculations and collection, our Duties etc. software is having a global impact – in particular in notoriously tricky markets such as China and Russia. There are a lot of things to consider before you start exporting and it’s essential to find out about local rules and regulations on tax and duty in your intended market.
Entering the market
Companies often take a staged approach to setting up in China and Russia. Many start by exporting a small amount to test the market. One of the key obstacles faced by companies penetrating these markets is a vastly different business culture and etiquette from that of Western Europe. It is necessary to spend time getting to know your customers and business partners. The main options for entering the Chinese and Russian markets are:
- Using agents or distributors
- Establishing a presence in China through either setting up a Wholly Foreign Owned Enterprise (WFOE) company, opening a representative office or working with a partner through a Joint Venture
- Exporting directly
- Licensing and franchising
- Using a UK-based consolidator/exporter
- Using a business incubator in China allowing a year round presence on the ground
You must identify whether the market is open to you and whether restrictions apply. Not all standards are aligned with established international standards. It is important to check the local laws, regulations, standards and certification requirements that apply to your area of business and you should always check the labelling requirements for your products.
Tax and customs considerations
The UK has double taxation agreements in place with China which means duties paid in China can be claimed back in the UK.
Russia and the UK have a Double Taxation Agreement in place, which means duties paid in Russia can be claimed back in the UK.
Value Added Tax (VAT)
When selling internationally there are different VAT rules depending on whether you are buying or selling goods or services within or outside the EU.
VAT in China is charged on the sales and import of goods as well as processing, repair and replacement services. There are exemptions for the import of certain goods identified in relevant regulations. The basic VAT rate is 17 per cent, but a lower rate of 13 per cent is levied on a number of goods.
VAT in Russia is charged at 18%, but there are reduced rates of 10% applied to books, food products, medical products, and children’s garments. There’s also a 0% rate on exports and associated services and suburban rail passenger transport (until 2029).
Taxes applicable to a Foreign Invested Enterprise (FIE) include:
- The EU SME Centre provides information on Enterprise Income Tax in China. All service companies obtaining income in China or with consumers located in China are subject to Chinese taxes, unless exempted expressly by Chinese regulations.
- Corporation tax in Russia is at a maximum rate of 20% on profits.
Customs duty can be calculated and paid in:
- Percentage of customs value of goods imported.
- Specific value, charged for one piece of the relevant goods category.
- Combined volume, a combination of the above.
The General Administration of Customs of the People’s Republic of China provides information on customs procedures and tariffs. You can find more about import tariffs in the Market Access Database.
There are very strong trade links between the UK and Russia – with goods and service exports worth around £7.6 billion to the UK. Although a massive part of Europe, Russia is not part of the EU, and all goods imported into Russia are regulated by the Federal Customs Service. Import customs duties are usually 5%, 10% and 15%, and are based upon the classification code and the country of origin. Certain goods are exempt from import duties, but others require a licence.
If you need to prepare your business systems for trade with emerging countries or complicated markets then our dedicated team would be happy to talk.