Current diamond taxation policy in China

From June 1, 2002, Chinese governments start the implementation of new taxation policy for imported diamond.

• Imported diamond (rough & polished) declared with SDE Customs is exempted from tariff and subject to 5% Consumption tax which is shifted from the stage of import to the stage of retail and 17% Valued-added tax at the stage of import. Pre-adjustment tariff: 3% for rough and 8% for polished, 17% Valued-added tax, 10% consumption tax.

As a matter of fact, the rate of Valued-added tax on diamond in China is not really high. The difference from other countries lies in the stage of collection. Valued-added tax is collected at the stage of import, processing, wholesale and retail respectively in China with the VAT at the stage of import collected by the Customs and the VAT at the stage of processing, wholesale and retail collected by the Taxation authorities. There are VAT in Belgium , Israel and South Africa at the rate of 21%, 18% and 14% respectively. But unlike in China , VAT in these three countries is collected only at the stage of retail. Due to different backgrounds and tax collection environments, the way VAT is collected in China is not likely to change in the near future.

• Imported diamond jewellery declared with Customs all over China is subject to Tariff 30%-35% and 17% Valued-added tax (collected by the Customs) at the stage of import and 5% Consumption tax which is shifted from the stage of import to the stage of retail.

Re-export of the imported diamond after manufacturing is subject to full-tax-refund policy, but relevant procedures shall be finished in advance.

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