From China to Russia: transaction processing, customs clearance and currency control

From China to Russia: transaction processing, customs clearance and currency control

The purchase of goods from China requires a careful approach to the registration of the transaction, customs clearance and compliance with currency control. Trading with Chinese suppliers has become an integral part of the business, and its popularity continues to grow from year to year. To make sure that your delivery will be successful and you will avoid unpleasant surprises, it is necessary to adhere to the rules of foreign trade.

Contractual relations

The execution of an agreement with a Chinese supplier has its own peculiarities. If your purchase is a one-time purchase, you can use an invoice. However, if you are planning a long-term and regular cooperation, then the best option would be to conclude a contract. In such a contract, it should be clearly defined:
• The subject of the contract, including product quality guarantees and certification.
• Terms of execution of the agreement and deadlines.
• Settlement procedure, setting the price and currency.
• Dispute resolution mechanism and applicable law.
• Details of both parties.

It is recommended to base contracts on the basic terms of INCOTERMS, international trade rules, in order to make their terms more understandable and transparent. It should also be noted that if the agreement is drawn up in a foreign language, it is necessary to provide its translation for the bank in the context of currency control. The contract must be signed by managers or representatives with authority. Customs clearance

The process of customs clearance of goods can be divided into three stages:

1. Registration: all necessary documents must be provided, including documents for the vehicle used for delivery. Certificates will also be required for some products. If the product is not subject to certification, it is recommended to receive a rejection letter from accredited certification centers.
2. Declaration: to submit a declaration, you need to know the HS code of the imported goods. It is important that the code in the declaration corresponds to the real product in order to avoid accusations of smuggling.
3. Mandatory payments: During the customs clearance process, you will have to pay several mandatory payments, including customs duty, customs duty, excise duty and VAT.

Customs duty

This is a fee for filing a declaration and is usually a small amount, depending on the value of the goods.

Customs duty

It is most often calculated as a percentage of the cost of the goods, taking into account all costs to the border, including transportation, insurance and other additional costs. The duty rate can reach 50%. Some goods may be subject to a minimum duty for each kilogram imported, regardless of the cost.

Excise duty

This payment is charged for the import of certain goods, such as alcohol and petroleum products, tobacco products and passenger cars.

VAT

When transporting goods from China, most companies, including their legal entities and entrepreneurs, are required to pay VAT (Value Added Tax). VAT is charged together with other payments during the customs procedure and applies to a wide range of goods, with the exception of those specified in Article 150 of the Tax Code and are exempt from taxation. This rule applies regardless of the chosen tax regime.

The amount of tax is calculated as follows:
VAT = (TC + TP + A) x CH,
where, TC is the customs value of the goods, consisting of the sum of the costs of production and transportation to the border;
TP — customs duty;
A — excise duty (if the product is excisable);
CH is the tax rate of 20, 10 or 0%.

You can return the tax paid at customs under certain conditions, which can be very beneficial for your business. To do this, the following points must be taken into account:
• General taxation system: The importer must apply a general taxation system.
• Transfer of VAT to the budget: The taxpayer must ensure that the VAT paid has been correctly transferred to the budget.
• Documents confirming the transaction: It is important to provide documents confirming the conclusion of the transaction, such as a customs declaration, contract, invoice, invoices and other primary documents.
• Use of products in taxable activities: Imported products must be used in your taxable activities.
• Product registration: Products must be properly registered.

If all these conditions are met, you can refund the tax paid at customs, accepting it for deduction when submitting a VAT declaration to the tax service. Do not forget to provide the relevant documents, including a customs declaration, an agreement, a payment order and documents on the acceptance of goods for accounting.

Choosing a bank

When choosing a bank for foreign trade activities, you should pay attention to several important points. It is important that the selected bank ensures reliable transactions and meets all requirements, especially in the context of sanctions. It is also worth considering tariffs for bank services, such as fees for maintaining foreign currency accounts and making payments. Choose a bank where the cost of services is minimal or not at all. The partners (banks) of the international business law company YANG CONSULT will provide you with reliable financial services for foreign trade activities without restrictions and disruptions. Currency control Currency control is an important procedure in foreign trade activities. It provides verification of transactions in accordance with the currency legislation. If there are doubts about the legality of the transaction, the bank may delay the payment. Tinkoff Business clients can undergo currency control in their personal account, which is convenient and does not require a visit to the bank. This procedure usually takes a few hours. If the contract was concluded in another currency and you decide to convert it to yuan, it is important to take into account the currency conversion rate on the date of the contract and correctly issue the relevant documents.

Experts of the business law company YANG CONSULT give the following advice on the execution of an additional agreement to the contract when changing the settlement currency. In such an agreement, it is worth specifying the following points:

1. Payment in a new currency: Specify that the price of the product is set in one currency (for example, US dollars), but payment will be made in another currency (for example, Chinese yuan). This is important to avoid misunderstandings in the future.
2. Conversion rate: Specify which exchange rate will be used when converting the amount from one currency to another. This may be the exchange rate of the Central Bank of Russia on the day of the transfer of funds or the exchange rate on a specific date.

An example of an additional agreement:
“The parties have determined that the price of the goods is set in US dollars, payment for the goods will be made in Chinese yuan. Currency conversion is carried out at the exchange rate set by the Central Bank of Russia on the day of the transfer of funds.”

The exchange rate can be either fixed or floating, depending on the agreements of the parties. If the exchange rate is not specified in the supplementary agreement, then the currency control will use the Central Bank’s default exchange rate on the day of payment.

For foreign trade operations, it is also important to take into account the following points:

• If the contract was concluded in another currency, and then it was decided to transfer it to another currency, it is necessary to clearly determine the currency conversion rate and arrange the documents accordingly.
• Currency control is carried out for contracts with a value of 3 million rubles or more. Submit the contract or its draft to the bank for registration. If a draft contract is provided, the original must be sent to the bank no later than 15 working days.
• If the contract does not contain an agreed value, registration for currency control should be carried out after the amount of supplies exceeds 3 million rubles.
• If payment abroad is made in rubles, it is necessary to specify the appropriate transaction code in the purpose of payment, in accordance with the instructions of the Bank of Russia. The transaction code will depend on the nature of the transaction, and you should find it out and use it in the purpose of the payment.
• The contract must be registered before the first transfer of funds and provide the documents on the basis of which the transfer is made (for example, an invoice), along with the transfer itself to the bank.
• Compliance with these rules and procedures will help ensure the correct conduct of currency transactions and avoid unpleasant surprises.

The partners of BPC YANG CONSULT (YC) will help you find a wholesale supplier from China — three product searches in Chinese factories for free.

For all questions related to the supply of goods from China, you can contact us by e-mail: info@yangconsult.com

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