This English translation is for reference only. The Chinese version shall prevail in case of any inconsistencies.

Announcement of the General Administration of Customs on Issuing the Measures of the Customs of the People’s Republic of China for the Collection of Taxes on the Domestic Sale of Value-Added Goods Processed in the Guangdong-Macao In-Depth Cooperation Zone in Hengqin

(Announcement No. 10 [2024] of General Administration of Customs)

For the purposes of implementing the requirements of the Master Plan for the Construction of Guangdong Macao In-Depth Cooperation Zone in Hengqin and supporting the high-quality development of the Guangdong-Macao In-Depth Cooperation Zone in Hengqin, the Measures of the Customs of the People’s Republic of China for the Collection of Taxes on the Domestic Sale of Value-Added Goods Processed in the Guangdong-Macao In-Depth Cooperation Zone in Hengqin are hereby developed and issued.

General Administration of Customs

January 24, 2024

Measures of the Customs of the People’s Republic of China for the Collection of Taxes on the Domestic Sale of Value-Added Goods Processed in the Guangdong-Macao In-Depth Cooperation Zone in Hengqin

Article 1 These measures are formulated to implement the General Plan for Building a Guangdong-Macao In-Depth Cooperation Zone in Hengqin, in accordance with the Customs Law of the People’s Republic of China, the Notice on the Relevant Import and Export Tax Policies Regarding Goods Entering and Leaving the Guangdong-Macao In-Depth Cooperation Zone in Hengqin (No. 1 [2024] of the Ministry of Finance, the General Adminstration of Customs, and the State of Taxation Administration) issued by the Ministry of Finance, the General Administration of Customs and the State Taxation Administration, the Measures of the Customs of the People’s Republic of China for the Supervision and Administration of the Guangdong-Macao In-Depth Cooperation Zone in Hengqin, and other relevant provisions.

Article 2 The goods produced by enterprises within the Guangdong-Macao In-Depth Cooperation Zone in Hengqin (hereinafter referred to as “the Cooperation Zone”), which contain imported materials and parts and whose added value reaches or exceeds 30% after processing within the Cooperation Zone, shall be exempt from import tariffs and be subject to import value-added tax (VAT) and consumption tax according to the actual inspection declaration status of goods when entering the Chinese mainland from the Cooperation Zone (hereinafter referred to as the “policy of exempting the added value from processing from tariffs”).

The policy of exempting the added value from processing from tariffs shall apply to the domestic sales of goods with the total added value from transfer for deep processing in the Cooperation Zone reaching or exceeding 30%.

Article 3 Enterprises to which the policy of exempting the added value from processing from tariffs applies shall be registered in the Cooperation Zone and have the status of an independent legal entity.

For the purpose of these measures, “value added after processing reaches or exceeds 30%” means that the value of the goods containing imported materials and parts added after the goods are manufactured or processed by an enterprise within the Cooperation Zone reaches or exceeds 30% of the total value of imported materials and parts and the materials and parts purchased from domestic areas outside of the Cooperation Zone.

For the purpose of these measures, “imported materials and parts” means the goods entering the Cooperation Zone from abroad for which import tax payment formalities have not been undergone, including bonded goods entering the Cooperation Zone from areas under special customs supervision, supervised bonded places, and processing trade enterprises outside of the Cooperation Zone in the Chinese mainland. The goods that enter the Cooperation Zone from the Chinese mainland for export declaration shall be deemed as imported materials and parts.

Article 4 The value added after processing, which reaches or exceeds 30%, shall be calculated under the following formula: ((Price for the sale of goods in a domestic area outside of the Cooperation Zone－Σ price of materials and parts imported from abroad－Σ price of materials and parts purchased in the domestic area outside of the Cooperation Zone) / (Σ price of materials and parts imported from abroad + Σ price of materials and parts purchased from the domestic area outside of the Cooperation Zone))×100%≥30%.

In the calculation formula, the determination of the relevant prices shall be executed with reference to the relevant provisions of the Measures of the Customs of the People’s Republic of China for the Determination of the Dutiable Value of Imported and Exported Goods and the Measures of the Customs of the People’s Republic of China for the Determination of the Dutiable Value of Bonded Goods Sold Domestically.

1. The price for the sale of goods in a domestic area outside of the Cooperation Zone is determined based on the transaction price when the enterprise in the Cooperation Zone sells goods containing imported materials and parts to the domestic area outside of the Cooperation Zone;

2. The price of imported materials and parts is determined based on the transaction price of the materials and parts imported by the enterprise in the Cooperation Zone, and should include transportation and related costs, and insurance fees incurred before the materials and parts are unloaded at the inland import location. The price of materials and parts entering the Cooperation Zone from the Chinese mainland for export declaration is determined based on the transaction price of the materials and parts, and shall include transportation and related costs, and insurance fees incurred when the materials and parts are transported to the Cooperation Zone;

3. The price of materials and parts purchased in the domestic area outside of the Cooperation Zone is determined based on the transaction price of the materials and parts purchased directly or indirectly by the enterprise in the Cooperation Zone from the domestic area outside of the Cooperation Zone, and shall include transportation and related costs, and insurance fees incurred when the materials and parts are transported to the Cooperation Zone.

Article 5 The Cooperation Zone Smart Port Public Service Platform (hereinafter referred to as the “Public Service Platform”) established by the Executive Committee of the Cooperation Zone shall meet the requirements for the registration of enterprises within the Cooperation Zone and the handling of matters related to value-added processing. The customs authorities shall share enterprise registration and other information with relevant departments through the Public Service Platform.

Article 6 Enterprises within the Cooperation Zone applying for the policy of exempting the added value from processing from tariffs for the first time shall file records with the customs through the “Value-Added Processing Calculation” module on the Public Service Platform, including information on the enterprise, finished products and materials, and processing technology.

Before the goods in question leave the Cooperation Zone for domestic sales, enterprises within the Cooperation Zone shall complete the value-added processing declaration procedures with the customs through the “Value-Added Processing Calculation” module on the Public Service Platform. If the added value after processing exceeds 30%, the customs system will automatically generate a confirmation number for the exemption of import tariffs on the value-added processed goods for domestic sales (hereinafter referred to as the “Confirmation Number”). If there are no changes in the sales price of the goods, the price of materials and parts, and the manufacturing and processing technology, enterprises within the Cooperation Zone need not reapply for the Confirmation Number; if there are any changes in the sales price of the goods, the price of materials and parts, and the manufacturing and processing technology, enterprises must reapply for the Confirmation Number as required.

Enterprises within the Cooperation Zone shall truthfully declare record information and the value-added situation of goods sold domestically through the Public Service Platform, be responsible for the authenticity, accuracy, and completeness of the self-declared information, and bear corresponding legal responsibilities.

Article 7 Import enterprises shall, in accordance with the stipulated procedures, present the Confirmation Number to the customs authorities for the purpose of import declaration and remittance of the applicable taxes. The requirements for the preparation of the customs declaration form are as follows:

The Customs of Declaration shall be designated as “Hengqin Customs (Code: 5795)”;

The Port of Entry shall be indicated as "Hengqin Customs (Code: 5795)";

The Associated Recordation Number shall be entered as a Confirmation Number formatted as “A + Four-digit Customs Area Code + Last Two Digits of the Year + Five-digit Serial Number”; Should there be a necessity to report more than one Confirmation Number, subsequent numbers shall be listed in the remarks section;

The Nature of Tax Levy and Exemption shall be specified as “Goods Subject to Value-Added Processing with Imported Materials (Code: 496)”;

The Supervisory Mode shall be recorded as “General Trade (Code: 0110)”;

The Mode of Tax Reduction and Exemption shall be noted as “In Line with the Nature of Tax Levy and Exemption (Code: 5)”;

The Transport Mode shall be identified as “Comprehensive Experimental Zone (Code: T)”.

All other items on the declaration form must be completed in accordance with the prevailing regulatory standards and requirements.

Article 8 The customs authorities shall, based on risk analysis, perform random inspections and audits to verify the declared value-added ratio, pricing, classification, origin, and other tax-related elements of enterprises operating within the Cooperation Zone.

Article 9 For enterprises within the Cooperation Zone that are subject to the policy of exempting the added value from processing from tariffs, the customs authorities shall enforce a “one enterprise, one account” management system and conduct lawful audits and inspections of such enterprises.

Article 10 The following categories of goods, with value-added processing reaching or exceeding 30%, when sold domestically from the Cooperation Zone, shall not be eligible for exemption from import tariffs:

1. Bonded imported materials and parts or their processed products that are subject to tariff quota management, trade remedy measures, suspension of tariff concession obligations, or additional tariff measures. This also includes additional tariff measures imposed for the collection of retaliatory tariffs, except for those items that are exempted under the first and second batch of exclusion measures for additional tariffs on U.S. goods during their respective exclusion periods. These exempted items are collectively referred to as “goods subject to the four types of measures”;

2. Goods that have undergone only minor processing or treatment, such as blending (including mixing with water or dilution), repackaging, splitting, combination packaging, sharpening, simple grinding, or simple cutting;

3. Other goods that, according to relevant regulations, should be subject to import tariffs.

Article 11 Enterprises within the Cooperation Zone that produce goods incorporating imported materials and parts with a value-added processing of less than 30% are subject to import tariffs, import value-added tax (VAT), and consumption tax based on the actual inspection and declaration status upon entry into the Chinese mainland from the Cooperation Zone. The selective tariff collection policy shall not apply to such goods. In cases where the imported materials and parts are classified as "goods subject to the four types of measures", the applicable import tariffs and relevant measures shall be levied accordingly, and import VAT and consumption tax shall be collected in accordance with the actual inspection and declaration status of the goods.

Article 12 The General Administration of Customs shall be responsible for the interpretation of these measures.

Article 13 These measures shall take effect from the date the Cooperation Zone officially commences special customs operations.