Understanding the Setup for VAT for Free Goods

Businesses in China pay both input VAT (for goods supplied) and output VAT (for goods sold).

China requires that you pay taxes on free goods. Free goods are often items that are given away to promote, display, or accompany a product that is ordered.

The amount of VAT paid for free goods is determined by the price of the goods if they were sold. The government and the supplier agree upon the price of free goods. Businesses in China are required to submit the amounts of VAT on free goods to the government tax authority.