VAT on Imported Goods from China: A Complete Guide

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Importers based in the European Union must pay Value Added Tax (VAT) on top of the Customs value. In this article, we help you navigate the complexities of ‘Import VAT’ when buying from China.

Keep reading, and learn more about VAT calculations, and whether or not Import VAT is deductible.

We also explain how and when you declare and pay VAT, and much more.

What is Value Added Tax (VAT)?

VAT is a consumption tax in the European Union. In B2C transactions, VAT is always included in the price. If you, for example, buy a product online from an EU based online store, the price you pay includes VAT.

The seller can then offset the VAT it ads on its sales, to the VAT it paid to other other EU businesses, when buying products or services.

Below follows an example:

  • Sales: $10,000 (Including VAT, 20%)
  • Expenses: $5,000 (Including VAT 20%)

This allows us to make the following calculation.

  • Sales VAT: $2,000
  • Paid VAT: $1,000
  • Total: $2,000 – $1,000 = $1,000

Thus, I would need to pay $1,000 of VAT. If I’d spent more on VAT than I added on top of my sales, I would instead get money back from the state.

However, when importing goods from China, you can’t pay the VAT directly to the supplier. Simply because Chinese businesses belong to a different tax system, and are not VAT registered in the EU.

When importing products, the same principle applies. If you pay more VAT on your imports than you add on your sales, you’ll get a refund.

VAT on Imported Goods from China

What is a Customs Value?

As the VAT calculation is based on the Customs Value, you need to be familiar with this term to understand the examples provided in this article.

In the European Union, the Customs Value is the total sum of the products (including development costs paid to the supplier) and shipping to the border.

Below follows an overview:

Always included in the Customs Value

  • Product cost (as paid to the supplier)
  • Insurance
  • Shipping cost to the Port of loading

Sometimes included in the Customs Value

  • Tooling and molds
  • Product samples
  • Design services (and related development services) paid to the supplier in China

Not included in the Customs Value

  • Transportation fees within the EU
  • Fees and services paid in the Port of Loading

Do I need to pay VAT when importing from Asia to the EU?

Yes, importers must pay VAT on top of the total sum of the Customs Value and the Import Duty.

VAT is paid to the state, in the country of entry and according to the local rate.

If I import goods to Spain, I pay VAT in Spain, according to Spanish VAT rates. If I am based in the UK, I pay the UK rate, to the HMRC, and so on.

How can I calculate the amount of VAT I must pay?

Yes. However, before you can do that you must know the following factors:

  • Customs Value
  • Import Duty Rate
  • VAT Rate

Below follows an example:

  • Customs Value: $10,000
  • Import Duty: 5% ($500)
  • Sum: $10,000 + $500 =$10,500
  • VAT Rate: 20% (UK Rate)
  • Total VAT: 20% x $10,500 = $2100
  • Total Amount: $10,500 + $2100 = $12,600

How do I make sure I pay the right VAT amount?

As mentioned, the VAT is calculated as a percentage of the customs value. As such, you have to ensure that the correct customs value is declared on the bill of lading, packing list, commercial invoice and other relevant documents.

Don’t assume that your supplier, or even forwarder, knows how to calculate the customs value.

Is the freight cost subject to VAT?

Yes, in the European Union, the customs value includes the shipping costs – up to the arrival in the port of destination.

However, any logistics costs that arrise within the EU, such as  unloading and customs clearance, shall not be included in the customs value.

That said, the forwarder will still add VAT on the invoice, but that is paid separately.

Can I pay VAT to the Chinese supplier?

No, you should not pay EU VAT to any non-EU entity, as they are not VAT registered in the European Union.

Neither shall you pay China VAT, as the supplier in China receives a VAT refund when exporting products.

What is the VAT rate in my country?

So far, each EU member state sets its own VAT rate. Each state can also set different VAT rates for different products or services – or even implement exemptions (0% VAT).

However, most products are taxed according to the standard VAT rate. You can find a full list here, or see the list below for a few EU states:

  • United Kingdom: 20%
  • Sweden: 25%
  • Italy. 22%
  • Germany: 19%
  • Netherlands: 21%

When importing from China, how and when do I pay the VAT?

There are two ways to pay VAT when importing goods from China:

a. Pay VAT upon arrival in the Port of Destination

Most Freight forwarders offer Customs clearance as a paid service. As such, they help you declare Customs duties and VAT to the local authorities.

The Freight forwarder invoice the buyer for the total amount (Import duties and VAT).

b. Declare the amount of Imported goods on the quarterly or yearly VAT declaration form

All VAT registered companies in the European Union must fill in a quarterly or yearly (sometimes even monthly) VAT declaration.

In the VAT form, there are fields for declaring the total amount of Imported goods, from which the local tax authorities can calculate a VAT amount.

The benefit is that the importer can then offset this amount directly from the amount of “sales VAT”.

Do I need to get VAT registered before importing from China?

This depends on the regulations in your country, as each EU member state set their own VAT rates and VAT registration rules.

For example, in the United Kingdom, companies are only required to get VAT registered once they reach a certain yearly revenue (around GDP 80,000).

However, UK companies must still pay VAT on imports from outside the EU, regardless of their revenue.

Hence, we recommend that you get VAT registered in your country, and a third country in case you will import the goods to another EU member state.

Can I deduct the VAT amount paid?

Yes, the amount of VAT you pay on your imported goods can be subtracted to the amount of VAT you shall pay on top of your sales invoices.

Example:

Company A is based in the UK and imports products valued at $20,000 from a supplier in Hong Kong. During the first year, they only manage to sell goods valued at $15,000. This gives us the following:

  • Sales VAT: $15,000 x 20% = $3,000
  • Paid VAT: $20,000 x 20% = $4,000
  • Balance: $3,000 – $4,000 = -$1,000

Given that they’ve already paid in more than the amount they are owed, Company A is eligible for a VAT refund. However, this may be reduced to zero in some cases.

Do I need to pay VAT when buying product samples?

Yes. There are two ways VAT can be paid on product samples:

a. Upon arrival in the EU member state
b. Declared as part of the Customs value of the first shipment

Are there any exemptions for importers?

Some EU member states set VAT thresholds between 10 euros to 22 euros. Hence, small sample orders may pass through without VAT being added.

Do the Customs authorities add VAT to every shipment?

No, it’s up to the importer to properly declare the value of the imported goods in the quarterly or yearly VAT declaration.

Do you have more questions about VAT when importing from China to Europe?

Write your questions in the comment form below, and we will add them to this article.

We are based in the EU, and dropship products from China back to customers in Europe. Who pays the VAT in this case?

Technically, the Importer shall pay the VAT. When you dropship products, your customer is the Importer, which therefore must pay VAT.

In reality, however, the customs autorities don’t have resources to add import duties and VAT on the tens of milions of e-packets coming into the EU, from Aliexpress, Wish and other dropshippers each year.

A likely scenario is that the tax authorities will go after dropshippers.

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    42 Responses to “VAT on Imported Goods from China: A Complete Guide”

    1. Alen Dane June 20, 2016 at 5:56 am #

      I have got much clear idea on the VAT system from this piece of writing. I’m just beginning my journey. Thanks. Definitely taking your recommendations.

    2. Angel June 23, 2016 at 1:51 pm #

      If the importer has to declare the value of the goods to the custom authorities, then who and how observers and checks for any potential frauds not being made? For instance, if the importer doesn’t present the real value of the goods but understate/minimize it purposely, in order to pay a small VAT? And is it possible to get involved the supplier as well?

      • ChinaImportal June 27, 2016 at 4:31 am #

        Hi Angel,

        There are 2 ways:

        1. The customs have access to a lot of historic data. If the goods are valued “too low”, they may demand bank transaction records

        2. You may also get caught in a company audit, in which case the authorities will compare the declared value to the amount paid to the supplier and freight forwarder

    3. Nabil June 27, 2016 at 6:33 pm #

      Hi,
      Is there any VAT on the machinery that imported from China and also is there any import duty, if yes, how much is that? Is the freight cost subject to any of the import duties and/or a VAT?
      Kind regards

      • ChinaImportal July 3, 2016 at 11:44 am #

        Hi Nabil,

        Yes, VAT applies to almost all products imported from China.

        The UK standard rate is currently 20%.

        Yes, it is, as the customs value includes shipping to the country of destination

    4. liam September 20, 2016 at 8:09 pm #

      Hi,
      I’m living in Ireland and looking to set up an online site to sell products from China
      Buying 500 products with a total price of €350
      New to this and wondering when I would pay VAT, should I register for VAT?

      • ChinaImportal September 26, 2016 at 3:37 am #

        Hi Liam,

        You normally pay VAT on arrival. And yes, you should register for VAT.

    5. Alex February 8, 2017 at 12:06 pm #

      Hi, Liam,

      Could You help me to solve the question:

      Our company based in UK (Scotland) and have VAT #.
      We are importer and wholesaler goods from China.

      -Country of entry is Lithuania and, as I understand we must pay VAT in Lithuania.
      -Our B2B Customers from Germany, Netherlands, Spain. Based on EU VAT rules we must sell to the EU clients goods without VAT.
      So… is it possible to refund (deduct) VAT what we paid in the country of entry (Lithuania) later in UK, where the company based?
      If yes, how we can do that?

      Thanks in advance,
      Alex.

      • ChinaImportal February 12, 2017 at 7:54 am #

        Yes, you don’t pay the full VAT more than once. If you import to Country A, with a 20% VAT rate, and then “export” the products to Country B, with a 25% VAT rate, you only pay the difference of 5%.

    6. chris July 1, 2017 at 3:58 pm #

      looking to ship golf club heads from china to Scotland , and they are asking for a Vat number , I am not a company just an individual making a purchase for myself , don’t understand the VAT number requirement?

      • ChinaImportal July 2, 2017 at 4:33 pm #

        Hi Chris,

        Only companies have VAT numbers. As an individual it should not be required.

    7. Ema July 9, 2017 at 9:07 pm #

      Hello,
      Could you please confirm if I understood correctly; if I am importing goods from China and my company is based in Germany but the port of entry is Slovenia, Kopar, then I would pay the Slovenian VAT in Kopar and from this point on simply transport the goods to Germany without paying German VAT? Thank you! Ema

      • ChinaImportal July 10, 2017 at 7:19 am #

        Hi Ema,

        No that is not correct. You will pay German VAT if the goods only transit through Slovenia.

    8. Michelle Paterson July 17, 2017 at 3:57 pm #

      Hi
      I have costed an ultrasound machine form china costing $14,000 this includes postage. I take it I have to add 20% VAT onto this? I noted some items were VAT free or am I just being hopeful.

      • ChinaImportal July 23, 2017 at 9:51 am #

        Hi Michelle,

        You will need to pay both VAT and import duties

        Be careful though. Machines must be CE compliant, and the customs may force you to show documentation that very few suppliers in China can provide.

    9. John July 19, 2017 at 5:17 pm #

      Hi

      I work for a Dutch company”s sister company based in the UK.

      We have a UK VAT number for the LTD company and a Dutch VAT number for the BV company.

      We import goods to the UK from outside the EU in the name of BV, do we use the UK VAT number (although Ltd don’t own the goods) to clear UK customs?

      • ChinaImportal July 23, 2017 at 9:49 am #

        Hi John,

        Good question. I am not sure if you can even import goods using an offshore (non EU) entity, to the EU.

    10. Daniel Jones October 23, 2017 at 12:38 am #

      Hi Fredrik

      Great article, thank you for the info it has cleared a lot up for me.

      I have a UK Ltd company selling products in the UK and Germany through Amazon, the stock being imported from China and stored in Amazon’s warehouse in both countries. This makes it so I have to register and submit VAT to Germany. I am not UK VAT registered and have not yet hit the threshold.

      I have a couple of questions:

      1. Do I calculate profit/loss to submit to Companies House and HMRC (CT) before or after deducting German VAT?
      2. Do I record import duties and shipping costs as a normal expense and the VAT on the goods and sales separately for my VAT returns?
      3. Is the profit from selling in Germany included in the profit threshold calculation in the UK for paying UK VAT?

      Once again, great article!

      Thanks for your help

      Daniel

    11. Li November 10, 2017 at 5:05 pm #

      Hi,
      If I import good from China, can I get an exemption on paying VAT if I resell the good to another EU business location in a different EU country.
      I am importing goods to Spain and am looking to sell to a business client in Belgium. My client is asking me to get an invoice on 0% vat reverse charge. Can I claim back the VAT that I paid at the time of import as otherwise all my margin goes to the state?
      Thanks
      Li

      • Fredrik Gronkvist November 12, 2017 at 11:51 am #

        Hi Li,

        Are the products shipped from China to Belgium or Spain to Belgium?

    12. Peter Man November 19, 2017 at 8:04 am #

      Hi Fredrik,

      Great article.

      We’re a business based in HK with an opportunity to sell to individual customers in Europe.

      Can we establish a company in Europe for invoicing and VAT purposes and deliver the product directly to our individual customer?

      Thanks,

      Peter

      • Fredrik Gronkvist November 19, 2017 at 10:53 am #

        Hi Peter,

        Will you still ship from Hong Kong directly to the customer in the EU?

    13. habiba January 30, 2018 at 8:50 pm #

      hi i ordered from china goods for about 291$ and i live in south africa so i paid about R3400 but when it came through to my country i had to pay R2800 on taxes and vat
      how is it calculated

      • Fredrik Gronkvist February 4, 2018 at 10:46 am #

        Hi Habiba,

        This article is about the EU.

        Most likely, the calculation method is similar for South Africa, but I don’t know the exact VAT amount

    14. Dan January 31, 2018 at 11:10 pm #

      Hi ,
      can I import goods for China , even if Im not VAT registered.
      I will customize them and sell it piece by piece on auction sites , but as individual not as company.
      The imported goods will cost about $10000
      Thanks.

      • Fredrik Gronkvist February 4, 2018 at 10:45 am #

        Hi Dan,

        I think you can, but you cannot deduct the VAT, which means it will be a lot more costly in the end

    15. Teresa February 8, 2018 at 4:31 pm #

      Hello Fredrik,
      Thanks for sharing the info. It’s very helpful.
      When I asking a quote from a supplier in China, she asked if I will make the customs declaration on my own or she will do it for me. I answered that I will ask my freight forwarder doing it.
      Then she asked if she needs to provide me the VAT invoices. If yes, the quote will be higher. However, you just mentioned that I shouldn’t pay VAT to China supplier directly. In this case, is she frauding me? What’s the VAT invoice for?
      Thanks

      • Fredrik Gronkvist February 11, 2018 at 8:22 am #

        Hi Teresa,

        The supplier is referring to Chinese VAT, which is a totally separate system. This article is about EU VAT.

        As an importer, you should order according to FOB terms. Hence, no China VAT is added.

    16. Neil February 12, 2018 at 9:12 am #

      Hi Fredrik, thank you for helping us :)

      Say we have a UK LLP that sells goods to a German client (B2B).
      The goods are manufactured in China and we ask our freight forwarder to deliver them to their warehouse in Ireland. We are also asking them to pay all import charges on our behalf, re-pack everything, and deliver to the client in Germany.
      Goods never actually enter the UK.
      How would it all work out with the VAT in the end?
      And what VAT shall we charge our German clients?
      Thanks

      • Fredrik Gronkvist February 18, 2018 at 10:57 am #

        Hi Neil,

        I am not a 100% sure, but I think that you will need to get VAT registered in Ireland, and your customer in Germany will pay the difference on the VAT in Germany.

    17. Ken March 22, 2018 at 8:31 pm #

      Hi Fredrick,

      Thanks for providing info. I am an Irish based business selling, importing good from China into Ireland, forwarding to Amazon FBA in UK with good being stored in Uk before being sold to Uk based private individuals. As the goods are stored in UK (Amazon warehouse) dies this mean I am an overseas seller as opposed to a distance seller and have to register for UK VAT with no threshold? Ie from first sale. Whereas if I was selling without from Ireland without UK storage I would be a distance seeker and follow Irish VAT rules until I reach Uk distance seller threshold of £70k? This is my understanding from online research. Is this correct and if so can I use VAT paid to Irish customs in goods from China against my UK VAT? Thanks again.

    18. amber March 27, 2018 at 4:34 pm #

      Hello Fredrik!
      I am importing a tent from china to Germany for personal use in my back yard.

      the shipping is going to cost around 600 and the tent around 1000 – I would be paying VAT and import tax yes? is there an easy calculator online that could help me estimate the total expected cost?

      Thank you!

    19. Dave James April 13, 2018 at 2:18 pm #

      Was going to import some equipment from China… but with all these extra charges it’s just not worth it. What a load of hassle and cost (plus about 25%). Forget it.

      • Fredrik Gronkvist April 15, 2018 at 7:59 am #

        Hi Dave,

        It never makes sense to import products from China, if it’s only for a single project.

    20. Marcus May 11, 2018 at 10:58 am #

      Hi Frederick
      I will have a UK Limited company. If I wish to import goods from Chinese manufacturer and have them delivered directly to my distributor in Ireland, and the distributor will pay me for the goods, do I register for VAT and pay/reclaim VAT in Ireland. Does this transaction have no impact from a UK VAT perspective and the distributor is responsible for his own sales and purchase VAT.

      • Fredrik Gronkvist May 13, 2018 at 10:20 am #

        Hi Marcus,

        Based on my understanding, they should pay VAT in Ireland on this transaction, assuming they are buying the goods from you.

        You may need to register for VAT in Ireland. This I am not sure of.

    21. Mirela Simonet May 25, 2018 at 10:26 am #

      Hello,the article was very informative.I need a bit of help as I am a novice at importing. I am bringing bycicles at total cost of 2400 USD to Bulgaria as an individual.Do you have an idea what my clearing,duty,vat costs will be

      • Ivan Malloci May 30, 2018 at 1:59 am #

        Hello Mirela,

        what we know it’s written in the article. We can help you with the calculation, however we can’t do it free of charge. The consulting is included in our starter package: http://www.chinaimportal.com/all-categories

    22. Mahamed June 5, 2018 at 1:32 pm #

      Hi,

      I am a UK based business which plans to sell goods imported from China to Germany via online. I would like to know if I would need to become vat registered in Germany as a result. If I do need to become registered am I able to reclaim any input vat that incur in the UK from the German government?

    23. Marc July 16, 2018 at 9:26 am #

      Unfortunately the calculation in the first example is not correct:
      The amount included VAT (20% in the example) and the VAT is being paid on the net amount, so the calculation for the VAT in 10.000 is:
      10.000 = 1,2*X (X is the amount without VAT)
      Solving for X, we get:
      10.000/1,2 = X
      X= 8.333,33
      The VAT is calculated as: 8.333,33*0,2=1.666,67
      The VAT in 5.000 of goods bought is hence 833,33.
      The VAT that has to be paid to the tax authorities is therefore: 1666,67-833,33=833,34
      Easier calculation:
      10.000-5.000=5.000
      5.000/1,2*0,2=833,34

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