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China’s Vape Industry: Consumption Tax to be Imposed from November 1

2022-11-07 11:08:03
  • October 25, 2022 – E-cigarettes will be subject to a consumption tax from November 1, 2022. China’s Ministry of Finance, General Administration of Customs, and State Tax Administration released the Announcement on the Collection of Consumption Tax on Electronic Cigarettes, which states that e-cigarette products will be subject to consumption tax and be added as a sub-item under the tobacco tax item list. From November 1, 2022, e-cigarettes will be subject to an ad valorem tax. The rate for the production and import of e-cigarettes will be 36 percent while the rate for wholesale will be 11 percent. Meanwhile, the announcement clarified that exports of e-cigarettes are eligible for the tax refund and exemption policy, signaling that China will still encourage the export of e-cigarettes. 

  • September 28 to 30, 2022 – China’s State Tobacco Monopoly Administration (STMA), the country’s top regulator of tobacco products, issued a notice on matters related to strengthening the regulation of e-cigarettes. The notice stressed the need for e-cigarette manufacturers, wholesalers, retailers, and other entities involved in the production or distribution of e-cigarettes to comply with new regulations released in late 2021 and early 2022. It included details of a dispute mechanism for companies that disagree with decisions on licensing made by the STMA during the transition period for companies to shift their business models to comply with regulations. In addition, on September 30, 2022, the STMA released two draft notices on limits for the number of e-cigarette products that can be carried or mailed across borders. The draft notices are open to public comment until October 30, 2022.

  • April 25, 2022 – the STMA released a new set of trial policy measures for regulating the e-cigarette industry, titled Several Policies and Measures on Promoting the Legalization and Standardization of the Electronic Cigarette Industry (Trial) (the “trial policy measures”). The trial policy measures build upon existing e-cigarette rules and regulations to standardize and regulate the development of the industry in order “to put the development of the e-cigarette industry on the track toward legalization and standardization”. The new trial policy measures provide clarity on how the STMA intends to supervise and regulate the industry following the decision to regulate e-cigarettes as tobacco products and place them under the purview of the tobacco regulator. Jump to our updates on the latest trial policy measures here [anchor link].

  • April 8, 2022 – the State Administration for Market Regulation (SAMR) approved the “Electronic Cigarette” Mandatory National Standards, numbered GB 41700-2022, which among other requirements ban the sale of vapes of any flavor other than tobacco. The standards take effect from October 1, 2022, meaning that some flavored vape products can be sold in China up until this date, which is beyond the initial date of May 1 stipulated in the latest administrative measures regulating the market. The document also sets a wide range of other technical standards, including permitted ingredients and additives, nicotine levels, testing and safety standards, and accreditation.

  • March 11, 2022 – the STMA, the country’s top regulator of tobacco products, released the finalized version of the Administrative Measures for E-Cigarettes, which lays out new regulations for the production, marketing, and sales of e-cigarettes in China. The latest version of the measures is an amendment to a previous draft that was released for public opinion in December 2021. Several provisions have been amended and new regulations added in the latest version. Among other new regulations, the measures now prohibit the sale of flavored e-cigarettes, a significant blow to the industry. The measures build upon a decision in 2021 to move the industry under the purview of the STMA and regulate e-cigarettes as a tobacco product. The measures will go into effect on May 1, 2022.

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