6% VAT now chargeable on freight costs from China - effective 1st August 2013

Good morning All

If you import from China, please be aware of a change in regulations in China which now means that Chinese equivalent of VAT is now payable on transportation charges, be that air or ocean. 

The 6% VAT charge will be levied when the ex works or freight charges (or both) are payable at origin (Incoterms FOB,FCA,CFR,CPT,CIF,DAP,DAT,DDP).

For many UK importers, they will import from China on FOB terms, so they just pay the freight costs from port-port (or airport-airport for air freight) and the Ex Works charges are payable by the shipper. In these cases, the Ex Works charges will be subject to VAT.

However, many importers also import on freight prepaid terms, Incoterms CPT/CFR or CIF and so the whole of the freight costs from ex works to arrival UK port/airport will be subject to the VAT.

Here's the thing to watch. Chinese suppliers may seek to recover some or all of this extra cost from their UK customers however we understand that the VAT will be recoverable (as is the case here in the UK) provided the Chinese company is registered with the Chinese Tax Bureau. You would imagine that most reputable Chinese companies will be registered so they'll be able to reclaim the VAT.

It will pay to be vigilant, especially for people in sourcing/purchasing who deal with the Chinese suppliers because the suppliers may try to pass the charge on, even for just the origin (Ex Works) charges which the suppliers currently pay if terms are FOB.

It seems like change is the only constant in international trade!

Kind Regards


Andy Cliff