In China SDE is the only legal channel for the import and export of rough diamonds and loose diamonds traded under general trade. SDE is based in Shanghai.

The Customs office in charge of the SDE (SDE Customs) supervises the diamonds into and out of the SDE.  Usually, diamonds imported into or exported from China under general trade must be shipped to Shanghai for on-site inspection by SDE Customs.  Under a pilot project of integrated customs clearance, SDE Customs has authorized Haikou Customs to inspect, on its behalf, loose diamonds imported into or exported from Haikou Free Trade Zone.  With this special arrangement, loose diamonds imported by an importer can be shipped directly to Haikou, without making a detour to Shanghai, while the customs clearance documents must still be handled by SDE Customs.

Diamonds imported through SDE enjoy zero tariff.  The diamonds that enter into SDE from abroad or enter abroad from SDE should be filed with SDE Customs for record, subject to no China taxes. The diamonds that enter into other domestic areas from SDE or enter into SDE from other domestic areas are subject to import or export customs clearance formalities.  Diamonds under processing trade are not subject to the jurisdiction of SDE, unless they are sold to China market in which case the diamonds should be traded through, or filed with, SDE.  The diamonds kept within SDE that are entrusted to be processed by enterprises established in Free Trade Zones or Export Processing Zones shall be under bonded supervision by the competent Customs. The diamond kept within SDE that are entrusted to be processed by enterprises in other areas are subject to the regulations for processing trade.

Current Taxation Policies of SDE

Import Tariff

Loose diamonds and rough diamonds (excluding those for industrial purposes) are free of import tariff if imported through SDE.

Import Value-Added Tax (VAT)

For loose diamonds imported through SDE and sold to China market, SDE Customs collects import VAT at the rate of 17% and simultaneously refunds 13%, leaving the importer’s ultimate import VAT burden at only 4%.  The importer can still get the VAT credit at the full rate of 17%, as if 17% VAT were paid upon import. 

For rough diamonds, no import VAT will be imposed if they are imported through SDE.

Diamonds imported for industrial purposes do not qualify for the above preferential treatments.  Rather, regular import tariffs and import VAT will be imposed.

VAT at Domestic Sales Chain

When the loose diamonds imported through SDE are sold in the China market, VAT at the regular rate of 17% will be imposed, with the full credit of import VAT at the rate of 17% eligible for deduction. 

Domestically-processed loose diamonds, if traded through SDE, are free from VAT at any subsequent  point  of domestic  retail  chain.  Domestically-processed loose diamonds, if not traded through SDE, are subject to 17% VAT when sold in China market.

Consumption Tax

Loose diamonds and diamond jewelry are subject to consumption tax at the rate of 5%.  This tax will only be imposed when the said products are sold to consumers. 

Export Tax Refund

Domestically processed loose diamonds enjoy no export tax refund when they enter into SDE even if doing so is deemed  as export.  When such a diamond re-enters China market through SDE, an import VAT, actually capped at 4%, will be imposed.