Import VAT and GST on China goods: the tax most importers underbudget
Importers obsess over duty rates and forget the bigger number. In most of the world, the VAT or GST charged at import is larger than the duty — and it's calculated on a base that includes the duty and the freight. Miss it in your budget and your cash flow takes the hit.
Is import VAT the same as duty?
No. Duty is a tariff based on your HS code and country of origin. VAT (or GST in some countries) is a consumption tax applied to almost everything you import, usually at a single standard rate. You typically pay both at the border, but they're separate calculations.
The key difference: duty is usually a sunk cost, while VAT is often reclaimable if you're a registered business.
How is import VAT calculated?
VAT is charged on the landed value, not just the product price. The base is typically:
product cost + freight + insurance + duty
Then the VAT rate applies to that whole figure. So if you import 10,000 USD of goods with 1,500 in freight and 800 in duty, a 20% VAT applies to about 12,300 — roughly 2,460, not 2,000. Because freight and duty inflate the base, the VAT bill is bigger than people expect. Build it into your landed-cost calculation from the start.
What are typical VAT and GST rates?
They vary widely by country:
- EU: standard VAT roughly 19% to 25%, depending on the member state
- UK: 20% standard VAT
- Australia: 10% GST
- Many others sit somewhere in the 10% to 20% band
Always confirm your country's current rate and any reduced rates for specific goods.
Can I reclaim import VAT?
Usually yes, if you're a VAT or GST registered business and the goods are for your taxable activity. You pay it at import and reclaim it on your return, so it becomes a cash-flow timing issue rather than a permanent cost. That's the crucial distinction: VAT affects when you have the money, duty affects whether the deal works. If you're not registered, or the goods are personal, VAT is a real cost like duty.
Why does this matter for cash flow?
Because you pay VAT upfront at the border and reclaim it weeks or months later. On large or frequent shipments, that gap ties up serious working capital. Plan for it the same way you plan inventory and lead times — as a timing problem to manage, not a surprise to absorb.
Put tax and freight in the same model
Duty, VAT, and freight together decide whether an import is profitable. Get the freight half from our estimator, add your duty and VAT on the landed base, and you'll see the true cost before you order — not after the tax invoice arrives.