How to Develop Leasing Business with Chinese Enterprises?

Contributed by Ms. Zhao Jing, Hylands Law Firm. For more posts about China Customs Affairs, please click here.

Overseas enterprises may enter into leasing contracts with Chinese enterprises to export goods to China by way of leasing.

Table of Contents

1. What goods can be traded through leasing?

These include electro-mechanical equipment, transportation equipment, construction machinery, medical equipment, aircraft and ships, large-scale complete sets of equipment and facilities, etc.

2. What goods cannot be traded through leasing?

These include:

Equipment and office appliances imported by enterprises for their own use;
Machinery and equipment imported under lease for processing trade (declared under the “equipment for processing trade” trade mode);
Goods imported under lease for compensation trade (declared under the “compensation trade” trade mode).

3. How to declare to China Customs？

Chinese importers need to submit to the China Customs the leasing contract, and provide details including (1) the name, quantity, specifications, and technical performance of the leased goods; (2) the lease term; (3) the composition, payment term, method, and currency of the lease payment; (4) the ownership of the leased goods upon expiration of the lease term.

If China Customs requires licensing for imported goods under leasing trade, the enterprises also need to submit the required licenses.

4. How to pay taxes to China Customs?

Customs calculates the tax based on the lease fee. Specifically:

(1) When the lease fee is paid in one lump sum, the tax is paid when the import declaration of the leased goods is filed.

(2) When the lease fee is paid in installments, the tax shall be paid in proportion to the first installment of the lease fee when the import declaration of the leased goods is filed. Thereafter the tax shall be paid within 15 days after any of the subsequent installments of the lease fee is paid.

5. How does the Customs supervise the leased goods after importation?

Imported goods under lease are still subject to the Customs’ continuous supervision after importation. Therefore, without the Customs’ approval, the enterprises are not allowed to transfer, sublease or mortgage the goods at will.

6. What happens when the lease expires?

Where the imported goods under the lease are to be re-shipped out of China, the importing enterprise shall, within 30 days from the expiration of the lease term, file an application to the Customs for concluding the supervision and control formalities and re-ship the goods out of China.
Where the imported goods under lease are to be purchased, the Customs shall review and determine the dutiable value and calculate and levy the applicable taxes.
Where the lease of imported goods under lease needs to be renewed, the importing enterprise shall submit the lease renewal contract to the Customs and declare the taxes accordingly.

Contributor: Zhao Jing

Agency/Firm: Hylands Law Firm

Position/Title: Partner