Wine Business in China: Taxation and Importation

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Category: Business in Asia, Regulations
Wine Business in China Taxation and Importation

Wine business opportunities in China are plenty as the demand for wine among consumers has increased significantly in recent years. The importation and local distribution (selling) of wine from wine-producing countries enable the wine industry to flourish.  According to the 2020 Hurun Chinese Luxury Consumer Survey, a preference for wine over other drinks among high net worth individuals (HNWI) is at 88 percent. This implies that wealthy consumers are spending money on wine, thus increasing the market demand for wine.

Have a look at our previous article about Wine Market Demand and Business Entry into China

Moreover, even though the wine market in China has suffered in 2020 due to COVID-19, the growing consumer demand for wine presents a business opportunity to international wine-producing countries. As a global business owner, there are several things you need to consider before selling wine in China.

Importing wine as a business – taxes and duties

Customs duties levied on wines imported to China fall under ad valorem tax – (Latin for “according to value”) tax on the estimated value of the goods or transaction involved. Here are some types of taxes and fees on alcohol one has to take into account:

Import custom duties – 14 percent for wine (alcohol content of ≤20% vol.); however, the rate may reach up to 20 percent for bulk wine or individual packages of more than 2L.

Cost, Insurance, and Freight (CIF or C&F price) – the expense of the seller to cover the possibility of loss or damage to a buyer’s order during transit; custom duty is CIF multiplied by 14 percent.

Excise tax

  • Excise tax = [(CIF + import tariff) / (1–10%)] x  10%

Value-Added Tax (VAT)

  • Value-Added Tax = (CIF + import tariff + excise tax) x 17%

Other fees – documentary and handling fees by the shipping company and freight forwarder

Free Trade Agreements – countries in Free Trade Agreements (FTA) with China are exceptions to the general computation of customs duties. While most countries’ imports of wine have taxes at about 48.2 percent altogether, the FTA countries are allowed to import wine without tariff in a particular period of the year.

Wine business planning

To be able to import wine into China, establishing a trading company (or other applicable solution) is necessary for the importation and distribution of wine. The following are the forms of business ownership or structures open to foreigners:

  • Wholly Foreign-Owned Enterprise (WOFE) is the principal form of a business open to foreign investors in China.
  • Joint Venture (JV) is also applicable when a Chinese enterprise is involved in the form of a partnership of businesses.
  • Acquisition, where an existing company may be acquired in a relatively more costly and time-consuming process that is strictly supervised and administered by Chinese authorities. However, the business acquisition is only highly suitable to foreign entities who are willing to invest heavily to build a strong business structure in China. At the same time, investors to this kind of structure must follow rigorous tax compliance processes and dole out capital expenditure to do so.
  • Representative office – Another option would be to set up a sales office (or representative office). Having a sales office, for instance, provides more flexibility and freedom in terms of carrying out commercial and marketing activities in China. In so doing, the dedicated sales team assigned to that office would conduct the overseas sales and networking of the imported product/s.
  • Professional Employer Organization (PEO or otherwise known as “Employer of Record or EOR”) is another option for foreign business owners. A PEO is an enterprise that takes over particular administrative functions like payroll, taxes, retirement, and employee benefits. By doing so, the PEO becomes a co-employer of the businesses that contract with them (usually SMEs), allowing for lower overhead. This is possible because PEOs combine the employees of several enterprises and thereby lower costs, reduce paperwork, increase efficiency, and so much more.

For foreign businesses who plan to start selling wine in China, there are some mandatory steps required by the government:

  1. A local importer is required to handle product registrations with the State Certification and Accreditation Administration (CAA) and the General Administration of Quality Supervision, Inspection, and Quarantine (GAQSIQ)). Therefore, a potential business owner must initially find a local importer and sign an agreement with them for such transactions.
  2. Before shipping the wine, the label is required to be registered (together with other documents that need to be sent) to the China Inspection and Quarantine (CIQ) for review.
  3. The local importer is required to declare the goods at the nearest CIQ office once the goods arrive in China.
  4. A certificate of approval is released once the shipment is deemed fit to follow China’s local standards.
  5. Finally, the imported wine will be subjected to product testing. This will analyze the allowable measure of metals, minerals, and vitamins.

After setting up your wine business

Once your business has been set up, managing its operations and accounting will be a priority. More often than not, foreign business owners need to check on the administrative business processes remotely. Approving leaves or expenses, setting up meetings, checking accounting entries, timesheets, and payroll: all these and more are necessary for the business to run smoothly.

It is imperative that a business solution that is fully compliant with Chinese regulations is employed, along with a professional team who knows their way around the industries and regulating bodies applicable.

Kwikdroid is a Cloud-based platform that aims to standardize, automate, and optimize all your daily accounting and business management operations. It contains features such as dashboard and reporting for ease of access, fapiao payment with the help of AI and OCR technologies, accounting and software integrations, multi-currency & multi-language, and so much more. Kwikdroid users will find their businesses in China to be more convenient and efficient, thanks to this digital accounting platform.

Wine Fairs in China

China’s efforts to expand wine importation into the country include holding wine fairs across the country. These events aim to gather wine producers to encourage meet-ups with regular and potential clients, as well as establish rapport with distributors. Moreover, meeting other players in the field and interacting with them is also very beneficial for business, not to mention gathering market information and weighing in the competition can also be achieved in fairs in general. Some of the major wine fairs in China include:

SUPER WINE

“The 22nd Shanghai International Wine and Spirits Exhibition 2021”

Dates: 20th – 22nd May 2021 (NECC, Hongqiao, Shanghai)

Held at an area of more than 150,000 sq. m. in Shanghai, Super Wine is among the most professional purchasing fairs in the country and has successfully presented numerous first-rank wine suppliers and professional buyers from more than 40 countries and regions globally.

ProWine China

Dates: 9th – 11th November 2021 Shanghai New International Expo Center (SNIEC)

As the leading international trade fair for wine and spirits in China, this platform allows international dealers, and producers as well as local suppliers to market themselves and establish their presence in the Chinese markets.

Developing trends, adding new highlights, and assuming a key role in the wine trade are among the opportunities offered in ProWine China. As a gateway to China, the fair provides optimum conditions to market international organizations from France, Germany, Italy, Spain, Chile, South Africa, United States, Argentina, Portugal, and Australia.

TopWine China

Dates: 1st – 3rd June 2021 (China National Convention Center, Beijing)

Being one of the biggest Business to Business (B2B) wine (and spirits) trade fairs in northern China, TopWine China provides a platform for global brands to market themselves to the Chinese markets. With over 10,000 attendees, wine producers (and their distributors) may strengthen their image and brand as well as meet potential clients, customers, and agents or distributors.

The 26th Interwine China

Dates: 3rd – 5th June 2021 (Area B, China Import & Export Fair Complex, Guangzhou); 28th – 30th October 2021 (Shenzhen autumn session)

Interwine China has an exhibition area of 50,000 m2 and attracts 50,000 visitors from around 53 countries. Wineries, importers, distributors, trade associations, and sommeliers from around the globe will be able to network among prospective clients and colleagues in the industry. It is a biannual event that allows industry players to discover new products and offers, and to discover opportunities in the field.

Conclusion

Wine selling and importing in China is indeed a booming industry. With demands going higher, investors and business owners from around the world have a chance to gather in the world’s second-largest economy and help cater to the developing market that is wine consumption. Since the market itself is not mature yet, consumers are still open to new products and offers which is an opportunity in itself to potential market players. Moreover, having knowledgeable professionals on your team who know the market and the government regulations surrounding the industry will be most beneficial in the success of your wine importing business.

Contact us

S.J. Grand provides advisory on setting up a business in China. We put our competent team at your service to give you the most effective China market entry, due diligence, and tax optimization strategy for foreign-invested enterprises.  Contact us to get you started.

Moreover, we have been at the forefront of promoting full automation of business operations, especially for startups and SMEs. We have introduced our Cloud-based advanced solution, Kwikdroid, to make business transactions easier with us, no matter what type or size of the company. Visit our Kwikdroid page to learn more about the services we offer.

 

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You may be interested to read about how to manage your company remotely using the advantages of Kwikdroid. Check it out!

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