On April 26, the "Tariff Law" was deliberated and passed by the ninth meeting of the Standing Committee of the 14th National People's Congress and came into force on December 1 this year. The Customs Law has maintained the basic stability of the current tariff and taxation system, and the level of tariff burden has remained unchanged after its implementation. The Customs Law consists of seven chapters and 72 articles, including general provisions, tax items and tax rates, tax payable, tax incentives and tariff collection under special circumstances, collection management, legal liability, supplementary provisions, etc. Compared with the current Regulations of the People's Republic of China on Import and Export Tariffs (hereinafter referred to as the Regulations on Import and Export Tariffs), what are the specific changes in tariffs? What do relevant taxpayers need to pay attention to?
Adjust the content
Compared with the current import and export tariff regulations, the Customs Law focuses on adjusting the provisions in four aspects.
-- Regulating the right to adjust tax rates. Compared with the import and export tariff regulations, the Customs Law has a high legal level, and the provisions of the Customs Law clarify the respective tax rate adjustment powers of the Standing Committee of the National People's Congress, the State Council and the Customs Tariff Commission of the State Council. According to Article 15 of the Customs Law, if it is necessary to adjust the most-favored-nation (MFN) tariff rate, tariff quota rate and export tax rate to which the People's Republic of China has pledged in the Protocol on Accession to the World Trade Organization, the Customs Tariff Commission of the State Council shall make a proposal and report it to the Standing Committee of the National People's Congress for decision after examination and approval by the State Council. On the basis of the actual situation, the adjustment of the most-favored-nation (MFN) tax rate, tariff quota rate and export tax rate, the adjustment of the country or region, the scope of goods and the tax rate to which the preferential tax rate applies, or the adjustment of the ordinary tax rate within the scope of the commitments made in the Protocol on the Accession of the People's Republic of China to the World Trade Organization shall be decided by the State Council and reported to the Standing Committee of the National People's Congress for the record. Article 7 of the Customs Law stipulates that the tariffs of trade remedy measures such as anti-dumping duties, countervailing duties, safeguard tariffs and tariffs shall be determined by the Customs Tariff Commission of the State Council.
-- Aligning with international economic and trade rules. In order to align with international high-standard economic and trade rules, and based on the mature experience of the Customs in "national customs clearance integration", Article 42 of the Customs Law clearly states that taxpayers and withholding agents of imported and exported goods may choose the Customs to handle tax declarations and payments in accordance with the regulations. For another example, with regard to the "two-step declaration" (i.e., enterprises do not need to fill in all the declaration items at one time, and can be divided into two steps of summary declaration and complete declaration for separate declaration), Article 41 of the Customs Law clarifies that the management of tariff collection can implement the mode of separating the release of goods from the determination of tax amount.
-- Clarify the time limit for tax collection and refund. With regard to the rule of "one year for tax payment and three years for retroactive collection" mentioned in the Import and Export Tariff Regulations, the Customs Law further clarifies that the Customs has the right to confirm the tax payable by the taxpayer or withholding agent within three years from the date of payment of tax or release of the goods. In other words, the period for "back tax" has been extended to 3 years. This amendment unifies the time limits for "back taxes" and "retrospective collections". According to the principle of reciprocity of rights and obligations, Article 51 of the Customs Law stipulates that if a taxpayer finds that he has overpaid tax, he or she may, within three years from the date of payment of tax (originally one year), apply in writing to the customs for a refund of the overpaid tax, which is a substantial benefit to import and export taxpayers.
- Clarify the priority of tax collection. As a special tax, tariffs do not directly apply the relevant provisions of the "tax priority" in the Tax Collection and Administration Law in practice. Paragraph 3 of Article 37 of the Customs Law stipulates that "where a people's court makes a judgment or ruling or the relevant administrative law enforcement department decides to dispose of goods under customs supervision, the party concerned shall be ordered to complete the customs formalities". In the past, in the event of bankruptcy and reorganization of an enterprise, it was not clear which priority was given to customs duties and other special priorities such as ship priority and security interest. In this regard, Article 58 of the Customs Law makes it clear that, unless otherwise provided by law, the tax collected by the Customs shall have priority over unsecured claims. If the taxpayer's tax arrears occur before the taxpayer creates a mortgage or pledge with his property, the tax shall be enforced before the mortgage or pledge. If a taxpayer owes tax and is at the same time fined or confiscated by the administrative organ, and his property is insufficient to pay at the same time, he shall pay the tax first.
What's new
The two new aspects of the Customs Law are also very worthy of the attention of import and export enterprises.
Currently, cross-border e-commerce is booming. According to data from the Ministry of Commerce, China's cross-border e-commerce import and export will be 2.38 trillion yuan in 2023, an increase of 15.6%, accounting for 5.7% of foreign trade import and export, which has become an important vital force in the development of China's foreign trade. In order to adapt to the development of cross-border e-commerce, Article 3 of the Customs Law clearly stipulates that e-commerce platform operators, logistics enterprises and customs declaration enterprises engaged in cross-border e-commerce retail imports, as well as entities and individuals with the obligation to withhold and remit, collect and remit customs duties and taxes as stipulated by laws and administrative regulations, are the withholding agents of customs duties.
At the same time, considering that smuggling violations in the cross-border e-commerce field are not uncommon, such as false declaration of commodity tax numbers and prices, fictitious domestic customer information, false information on three orders, etc. In order to urge e-commerce platform operators to better fulfill their tariff withholding obligations, standardize the compliance operations of logistics enterprises and customs declaration enterprises. As a new provision, Article 64 of the Customs Law clearly stipulates that if a withholding agent withholds or collects uncollected tax, the Customs shall recover the tax from the taxpayer and impose a fine of not less than 50% but not more than 3 times the amount of the unwithheld or receivable tax on the withholding agent.
In addition, in order to ensure the effectiveness of the mainland's current tariff measures such as anti-dumping, anti-subsidy and retaliatory tariffs, it is clear that anti-circumvention measures can be taken against enterprises to circumvent tariffs, so as to coordinate security and development. Article 54 of the Customs Law clearly states that the state may take anti-circumvention measures such as adjusting tariffs to circumvent the relevant provisions of Chapters II and III of this Law and reduce the tax payable without a reasonable commercial purpose. For example, the scope of taxable products may be redefined, the relevant taxes may be calculated and recovered, and the enterprise may be required to stop the business operation methods that constitute circumvention.
Practical advice
The Customs Law is an important legislation in the field of customs and international trade, which not only provides detailed provisions on matters related to the collection and management of customs at the legal level, but also maintains the current tariff tax system and tax burden, and also fixes the new tax collection and management model adopted by the customs to improve trade facilitation in the form of law, so that import and export enterprises have greater certainty in the payment of import taxes.
Based on this, before the implementation of the Customs Law on December 1, 2024, the majority of import and export enterprises should carefully study the Customs Law, and actively carry out self-inspection of the internal declaration and tax payment process and the accuracy of tax-related elements according to the key content and changes of the Customs Law, focus on self-checking the compliance of the current declaration and tax payment process of import and export business, and check the accuracy of the declaration of tax-related elements such as commodity classification, price, and origin of import and export goods. For the tax-related issues found in the self-inspection, it is recommended that enterprises report to the customs through voluntary disclosure, and strive to be exempted from late fees and administrative penalties. If there are complex technical problems in tax-related factors such as commodity classification, price, and place of origin, the enterprise can obtain tax certainty and reduce potential tax-related risks in the future by applying to the Customs for the corresponding advance ruling. At the same time, considering that the Ministry of Finance and the General Administration of Customs may revise the relevant customs regulations in the future, it is recommended that import and export enterprises maintain a high degree of attention to the laws and regulations, and adjust their tax treatment and internal control compliance systems in a timely manner according to the updated regulations.
Source: China Tax News; 17.05.2024; Edition: 06; Author: Wu Gang, Pan Nanshan; Author's Affiliation: PricewaterhouseCoopers International Trade Consulting (Shanghai) Co., Ltd. The content of this article is for general information purposes only and is not intended as formal auditor, accounting, tax or other advice, and we cannot guarantee that such information will remain accurate in the future. No person should act on the basis of the information contained herein without having due regard to the relevant circumstances and obtaining appropriate professional advice. The articles reproduced in this issue are for academic exchange purposes only. The original copyright of the article or material belongs to the original author or original copyright owner, and we respect copyright protection. If you have any questions, please contact us, thank you!