China’s Tax Free Era For Cross-border e-Commerce Ends Today

The new policy, announced by the Ministry of Finance, the General Administration of Customs and the State Administration of Taxation on March 24, combines an import value-added tax with a consumption tax.

Retail goods bought online will no longer be classed as “parcels,” which enjoy a “personal postal articles tax” rate below that of other imported goods. Instead, online purchases from overseas will be charged in the same way as any other imported goods, the Ministry of Finance has said.

China levies a personal postal articles tax on cross-border e-commce goods worth less than 1,000 yuan (US$150), and the rate is mostly 10 percent. Taxes under 50 yuan (US$7) are waived. As the demand for overseas goods grows, online purchasing agents have taken advantage of parcel tax and used new methods such as repackaging and mailing products separately to avoid taxes.

The new policy only allows a maximum of 2,000 yuan (US$309) per single cross-border transaction and a maximum of 20,000 yuan (US$3090) per person per year. Goods that exceed these limits will be levied the full tax for general trade.

A shopping spree had spread across the internet in wake of the annunciation of the new policy while online retailers persuaded customers to grasp the last chance to click for more cross-border purchases until April 8.

It is true that the cross-border websites are going to see their costs rise substantially. But is this really bad news for shoppers? Not necessarily.

Tech.sina.com.cn reported that only cosmetics worth less than 100 yuan (US$15) will see a surge in prices, but body care products and cosmetics worth more than 100 yuan may see a plunge in prices.

“Customers’ shopping enthusiasm may be impacted temporarily, but it is a blessing for the whole cross-border e-commerce industry, and sales will see an increase in the long run,” said Qiu Huang, who is in charge of the cross-border purchase affairs of JD.com, an online retail giant in China.

The prices of many products on the cross-border shopping websites are still lower than those offered by traditional retailers and importers despite possible changes, giving a good reason for optimism, he added.

As the Chinese people’s views on consumption change, many customers have become more sensitive to quality and service rather than price, echoed Zeng Bibo, the CEO of cross-border e-commerce platform Ymatou.com.

Under the new policy, customs officials are expected to examine more undeclared parcels than they used to. “Individuals who shop online overseas may find it more time consuming for custom clearance and may be more likely to be taxed than they were before, which gives an edge for companies that manage their business through stocking imported goods in bonded zones,” said Liu Nan, the founder and CEO of cross-border e-commerce platform Mia.com.

But Tech.sina.com.cn has learned that a large part of commodities stocked in bonded zones are in great demand and are relatively cheap. As cosmetics and body care products worth less than 100 yuan will be taxed, sales from the bonded zones is set to decline, at least for some time.

Li Pengbo, deputy secretary general of the China Cross-Border E-Commerce Forum, pointed out that the new taxation policy may somehow be good news for private overseas shopping representatives, whose space was squeezed due to the boost of cross-border e-commerce companies.

Zhang Li, another expert in e-commerce, believes that the new policy will put an end to unfair competition and promote the sound development of the industry.

More cross-border e-commerce pilot zones will be set up to lure businesses, create jobs and nurture new business models that will boost foreign trade and stimulate the economy, the State Council said in January.

The Ministry of Commerce also predicts that the country’s cross-border e-commerce trade will reach 6.5 trillion yuan (about US$1 trillion) in 2016 despite the complexity brought by policy changes.

Source: Xinhua