China's e-Commerce Tax Changes Come Into Effect,
by Mary Swire, Tax-News.com, Hong Kong
Tuesday, April 12, 2016
China's new rules that increase the taxes on goods imported online, which were
jointly announced by the Ministry of Finance, the General Administration of
Customs, and the State Administration of Taxation on March 24, went into effect
on April 8, 2016.
Retail products imported by consumers through online purchases used to be classified
as "parcels," and were subject to a "personal postal articles
tax" at a general rate of 10 percent for goods priced at less than RMB1,000
(USD155). Tax payable of under RMB50 was waived.
The new tax rules have been introduced to create a more level playing field
with other imported goods sold by Chinese domestic retailers. The rapid rise
in cross-border e-commerce had seen online retailers taking advantage of the
parcel tax framework by, for example, dividing product packages to avoid taxation.
From April 8, untaxed cross-border online transactions are limited to a maximum
of RMB2,000 per transaction, and to RMB20,000 per person each year. Goods exceeding
those limits are treated as normal imports, and may be subjected to variable
tariffs, a general 17 percent import value-added tax (VAT), and a consumption
tax payable on luxury or non-essential items, such as alcohol, petrol,
jewelry, and cars.
However, at the outset of the new regulations, tariffs for online imports will
remain at zero, while import VAT and consumption tax will be levied at 70 percent
of normal rates.
In addition, on April 7, the Ministry of Finance issued a list of more than
1,000 products, including food, clothes, shoes, and some cosmetics, that
are considered necessary and most purchased by Chinese consumers online. The
Ministry indicated that the list is a way to continue the previous "personal
use" element in the parcels tax, and that it would be adjusted over time
depending on the development of e-commerce and the demands of consumers.
The Ministry of Commerce has previously predicted that Chinese cross-border
e-commerce trade would reach RMB6.5 trillion this year, and would shortly represent
20 percent of the country's foreign trade.