CHINA: CUSTOMS, TAXES and DOCUMENTATION REQUIREMENTS for IT PRODUCTS and SERVICES IMPORTS

A. IS THIS COUNTRY A MEMBER OF THE INFORMATION TECHNOLOGY AGREEMENT?

YES. Upon accession to the ITA in December 2001, China agreed to eliminate tariffs on three fourths of ITA products by January 1, 2003, and eliminate tariffs on all remaining ITA products by January 1, 2005. To find out China's current tariff rate on your exact IT product, call the Trade Information Center at 1-800-USA-TRADE.

Signatories to the Information Technology Agreement (ITA) have eliminated their import duties on a wide range of information technology products, including software and computer hardware. For more information on the ITA, and exact tariff elimination schedules of signatories.

B. CUSTOMS DOCUMENTATION REQUIREMENTS FOR IT PRODUCTS

What are the documentation requirements for the physical import of software? For other information technology products?

Documents required for the import of software and other information technology products: bill of lading, packaging list, invoice, and a customs declaration form.

Companies who want to export software (or any other product for that matter) to China must first find a Chinese company that has been authorized by the Chinese Ministry of Commerce (MOC) to operate with an import license. The Chinese companies with authorized import licenses can assist U.S. companies in exchanging Chinese currency into U.S. dollars. According to China's WTO commitment, China will open their import/export license regulations, however, changes are not expected for another year or two.

C. SOFTWARE: DUTIES and TAXES, UPDATES, LICENSES, ELECTRONICALLY DELIVERED

DUTIES AND TAXES ON SOFTWARE IMPORTS

Are duties assessed on the intellectual property of the software or on the medium on which is it presented?

Duty rates are determined by the type of medium on which software is presented. The current tariff rate (duty) is 0.

Are taxes assessed on the intellectual property of the software or on the medium on which is it presented?

The tax (VAT and etc.) is based on the intellectual property value of the software. VAT is 17%. A 10% withholding tax also applies to software products.

Is customized software treated differently than packaged software?

There is no difference in treatment of customized and packaged software.

IMPORTS OF SOFTWARE UPDATES

What are the customs duties and tax implications for software sold with updates when the full sales price, including cost of updates, is shown on the original commercial invoice? Are duties and taxes paid on that amount? What happens when the updates are sent at a later date? Are duties/taxes applied again? If so, based on what value? How should information presented on the commercial invoice for the original and subsequent shipments to avoid paying duties/taxes more than once on a single sale?

Yes. Duty and VAT taxes are paid according to the declared value and at rate of the medium on which it is presented. The current tariff rate is 0. VAT is 17%. A 10% withholding tax also applies to software products.

SOFTWARE LICENSES: CUSTOMS CLASSIFICATION, IMPORT DUTIES, TAXES, OTHER

Are software licenses classified in Harmonized System 4907?

Software licenses are not classified in harmonized system 4907. Customs controls only shipment of physical goods. If there is no physical shipment, customs does not have a mechanism to control licenses unless companies use a physical package to go through customs, such as a disk or envelope. In this case, the product will be classified under 8524.

Are import duties/taxes applied? If so, on what cost/price base are they levied?

Yes. VAT and a 10% withholding tax are applied to software licenses.

Are withholding or other additional taxes applied on software licenses? If yes, how?

Yes. A 10% withholding tax is applied to software licenses.

If a U.S. license agreement is included in the packaging or is part of the installation/registration of shrink-wrapped software imported from the United States, would that agreement be binding on consumers in your market? If so, would U.S. or local laws pertain?

Local laws will pertain.

SOFTWARE DELIVERED OVER THE INTERNET/ELECTRONICALLY DELIVERED SOFTWARE

Are taxes applied to software delivered to the end-user over the Internet? If so, on what value?

A 10% withholding tax and VAT is applied. The tax is collected according to the value indicated on the commercial invoice.

Would the situation be different if this software were instead delivered to a distributor who has a license to produce (replicate) and sell the software?

No difference to software licensed to distribution for reproduction and duplication.

What are the documentation requirements for the electronically delivered import of digitized products (i.e. software, movie downloads) over the Internet or other networks?

There is no mechanism to track import of digitized products over the Internet or other networks (software, movie, music) by customs. For movies and music, the trade is conducted mainly in the form of licenses to copyrights. Special permits are required from the Ministry of Cultural and the Press and Publication Administration in addition to the normally required documents including invoice, declaration, bill of lading (if applicable), list of packages (if applicable)

Must an electronically delivered software import be accompanied by a physical shipment of the same product?

No.

D. IT SERVICES: TAX TREATMENT AND OTHER REGULATIONS

Are services (i.e. training, set-up, etc) relating to the sale of software taxed? If so, at what rate and based on what value?

A 10% withholding tax is applied to services based on invoiced value.

Are U.S. IT solution providers permitted to send personnel into the country to set up hardware/software-related systems?

Yes.

Are special visa, work permits, and/or professional certification by an accredited body required?

Documents required: invitation letter, passport, and a completed visa application form. No special work permit or professional certification is needed for stay within 6 months.

E. REFURBISHED, USED, OR REPAIRED COMPUTER EQUIPMENT IMPORTS

1. REFURBISHED COMPUTER EQUIPMENT

Is the import of refurbished computer hardware, parts, and accessories (including toner cartridges) permitted?

Currently import of refurbished computer hardware, parts, and accessories is tightly restricted. A special permit needs to be obtained from MOFTEC (Ministry of Foreign Trade and Economic Cooperation) if such an import is needed. However, an official from MOFTEC has indicated that a revision to the tightly restricted regulation will be issued soon.

2. USED COMPUTER EQUIPMENT

Is the import of used computer hardware, parts, and accessories (including toner cartridges) permitted?

See above answer.

3. REPAIRED COMPUTER EQUIPMENT

Are duties and taxes assessed on the re-import of repaired computer equipment?

Computer equipment re-imported after repair is not taxed if it is within the warranty period. After the warranty period, the repair service is taxed.

How should the commercial invoice appear?

Invoice needs to indicate the repair service fee.