Meaning
A customs regulatory framework governed by the General Administration of Customs of China defines the procedure for declaring and taxing royalty and assist payments after the initial import of goods. Under announcement 2022 number 2, importers must report any royalty payments made to foreign rights holders within a specified period following the transaction. This measure targets payments that were not determinable at the time of importation but are legally linked to the imported commodities.
The framework provides a structured pathway for companies to voluntarily disclose and calculate the supplementary duties owed.
Reporting Schedule
Importers face strict deadlines to declare these post-importation adjustments to avoid serious tax penalties. Under the provisions of announcement 2022 number 2, businesses must complete their declarations and pay the corresponding customs duty and import value-added tax within thirty days of making the actual royalty payment. This clear timeframe replaces the older, more ambiguous rules where businesses had to wait for annual audits to rectify their tax positions.
It ensures that the government collects its revenue promptly while giving companies a clear timeline to organize their financial records.
Customs Adjustment
The actual calculation of duties on royalty payments requires isolating the portion of the payment that is directly attributable to the imported goods. When announcement 2022 number 2 is applied, customs authorities inspect license agreements, patent certificates, and financial ledgers to verify the connection between the royalty and the goods. If the royalty is paid for a trademark used on finished goods produced in China from imported raw materials, the importer must apply a reasonable allocation method to determine the dutiable portion.
This allocation process often requires expert consultation to ensure the customs bureau accepts the methodology and does not impose its own unilateral calculation. Customs officers use the submitted data to issue a supplementary payment receipt, allowing the importer to formally settle the transaction and update their compliance record. This formal documentation is crucial for verifying that the royalty costs have been correctly taxed during subsequent corporate reviews.
Compliance Consequence
Failure to comply with these disclosure rules leads to automatic classification as a non-compliant importer and triggers intensive customs investigations. Voluntary compliance under announcement 2022 number 2 exempts the enterprise from late payment interest and administrative fines, making self-disclosure highly attractive. However, if customs officers discover unpaid royalties during a routine audit before the importer has self-disclosed, the company faces severe fines and a downgrade of its corporate credit rating.
This credit downgrade can result in higher inspection rates and slower clearance times for all future import shipments.
