China Implements VAT on Freight and Transport Charges

The China Central Tax Bureau has been in the process of implementing a Value Added Tax (VAT, equivalent to Australian GST) of approx. 6% throughout China.

The State Administration of Taxation (SAT) of The People”s Republic of China (PRC) and the Ministry of Finance (MOF) have made a joint annoucement that all shipping lines, air lines and international freight forwarders will now have to charge VAT on all charges for all services which includes international freight starting August 1, 2013.

More specifically, all charges “PAID AND INVOICED IN CHINA” will now be subject to a 6% VAT regardless of whether they are being billed to a local or an offshore company/entity.

Implications for Australian Importers from China

  • International Freight

If you are being invoiced international freight from China, this will incur a 6% VAT Charge.  There is currently no clarity on whether the VAT can be claimed back if the charges are being billed to an offshore company.

  • Chinese FOB Charges

A 6% VAT will apply on all local charges in China.  If the VAT cannot be claimed back for offshore billings, suppliers will face a 6% increase in costs. It is expected that many exporters will look to pass this VAT on to the importer should they be unable to claim back the VAT.

Hornet Group Response

For projects already quoted, accepted and in-progress, it is case-by-case whether the 6% VAT will be absorbed or on-charged.

For future quotations, Hornet Group will clarify whether the quotation includes VAT or not so that all clients can make an informed decision.

Industry Response

Many shipping lines and airlines are forming a coalition to approach the China Central Tax Bureau requesting it apply 0% VAT on international freight charges.  This would bring China in-line with international practices.

The International Freight Forwarders Association of China is also approaching the China Tax Bureau to apply for 0% VAT on international freight.

If you have any questions or queries in regards to the VAT, please do not hesitate to email us at or give us a call on 61 2 9653 9127.


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