China to Impose Consumption Tax on E-cigarettes

ENG  China to Impose Consumption Tax on E-cigarettes

In order to improve the Consumption Tax system and better guiding healthy consumption, the Ministry of Finance, the General Administration of Customs and the General Administration of Taxation issued the Announcement on the Levy of Consumption Tax on Electronic Cigarettes from November 1st, clarifying that there will be a new sub-category created for electronic cigarettes under the tax heading of cigarettes.

This article aims to brief the impacts on matters related to the imposition of Consumption Tax on the electronic cigarettes industry. From a general standpoint, the specific conditions are as follows:

1. Electronic cigarettes are electronic delivery systems used to produce aerosols for vaping. The category includes vape cartridges, vaping devices and e-cigarette products also sold in combinations.

2. Business entities and individuals who manufacture (import) or wholesale e-cigarettes in the People’s Republic of China (PRC) shall be considered as taxpayers of Consumption Tax. In addition, it should be noted that enterprises who have obtained their own e-cigarette trademark shall be responsible for not only for its own trademarked e-cigarettes, but also acting as a manufacturing agent for the e-cigarette production of third parties, the two different trademarked e-cigarettes sales shall be clearly separated; and said enterprises shall only pay Consumption Tax based on the owned trademark e-cigarette sales. If the sales are not clearly separated, the enterprises shall pay the Consumption Tax for all of the sales.  

3. A tax rate of 36% will be placed on the production or import of e-cigarettes, while an 11% tax will be placed on the wholesale distribution of e-cigarettes. Previously, vaping devices had only been subject to VAT in China. The taxation policy will further entrench China's once-scattered e-cigarette industry into the state-backed tobacco monopoly, a major generator of tax revenue.

4. China adopts a fixed-pricing approach to e-cigarettes, which simply means that enterprises and individuals engaged in all aspects, such as production, wholesale, and import of e-cigarettes, are required to calculate their Consumption Tax in accordance with the composite assessable value, then apply to regulated Consumption Tax rate.

5. The export tax refund and VAT exemption policy shall be applicable for taxpayers who export e-cigarettes. As over 70 percent of China’s 1,500 e-cigarette producers focus on exports, it should be noted that manufacturers will be eligible for tax rebates and exemptions if they sell their e-cigarette devices overseas.

The introduction of the Consumption Tax on vaping devices is part of a series of measures taken by the PRC Government over the past years to align the new emerging industry with traditional tobacco products; notably, the application of taxes will significantly impact production and operational costs. As a result, the price of e-cigarettes is likely to increase, which could also lead to a reduction in domestic demand, in line with the general purpose of “tobacco control”.

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At PHC Advisory, our team is constantly monitoring the most recent  tax and exemption policies in China. Feel free to reach us at [e-mail] to find out more about preferential policies in China that your company could benefit from.

CHN  中国将对电子烟征收消费税

为完善消费税制度，更好地引导健康消费，财政部、海关总署、税务总局于11月1日发布《关于对电子烟征收消费税的公告》，同时明确将在烟税目下增设电子烟子目。

本文旨在简要介绍对电子烟行业征收消费税的相关事宜的影响。从总体上看，具体条件如下：

（一）电子烟是用于产生气溶胶的电子输送系统，用于吸食。该类别包括烟弹、烟具，也有组合销售的电子烟产品。

（二）在中华人民共和国境内生产（进口）、批发电子烟的单位和个人为消费税纳税人。另外，需要注意的是，取得自有电子烟商标手续的企业，不仅为其自有商标的电子烟提供服务，而且还为第三方商标的电子烟生产提供代理服务，两种不同商标的电子烟销售应明确分开，且上述企业只应按自有商标的电子烟销售额缴纳消费税。如果没有明确分开销售，企业应按所有的销售量缴纳消费税。

（三）电子烟的生产或进口将被征收36%的税率，而电子烟的批发销售环节将被征收11%的税。此前，电子烟设备在中国只需要缴纳增值税。这项税收政策将进一步巩固中国曾经分散的电子烟行业，使其成为国家支持的烟草垄断行业，成为税收的主要来源。

（四）中国对电子烟实行从价定率的办法计算纳税，简单来说就是从事电子烟生产、批发、进口等各个环节的企业和个人，都要按照综合应纳税额计算消费税，然后适用规范的消费税税率。

（五）出口退税和增值税免税政策适用于出口电子烟的纳税人。由于中国1500家电子烟生产企业中，超过70%的企业以出口为主，因此应该注意到，如果生产企业将其电子烟设备销往海外，将有资格获得退税和免税。

对电子烟设备征收消费税是中国政府在过去几年采取的一系列措施的一部分，目的是使新行业与传统烟草产品保持一致；值得注意的是，税收的应用将大大影响生产和运营成本。因此，电子烟的价格可能会上升，这也可能导致国内需求的减少，这与“烟草控制”的总体目的是一致的。

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在普咨锐家财税咨询公司，我们的团队正在不断监测中国最新的税收和免税政策。请随时与我们联系，[e-mail]，以了解更多贵公司可以从中受益的中国优惠政策。

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