SHANGHAI — Starting April 8, cross-border e-commerce purchases in China will be subject to a new taxation system that alters significantly the way goods valued in the $150 to $300 price bracket are taxed for consumers.
A value added tax, excise duty and customs tariffs are normally levied on imported goods coming into China with different rates applicable to different product categories. But until now, goods ordered online from overseas that are valued at less than 1,000 yuan, or approximately $154 at current exchange, have instead paid a “parcel tax” (usually around 10 percent). For parcels with a value of less than 50 yuan, or $7.70, this payment is waived completely.
Under the new rules, just announced by the country’s Ministry of Finance, General Administration of Customs and the State Administration of Taxation, the “parcel tax” will no longer apply, and some cross-border e-commerce orders will be subject to a higher tax rate, others to a lower tax rate, depending on their value and product category.
Goods purchased from cross-border e-commerce platforms with a single transaction value of less than 2,000 yuan (or $307 at current exchange) will be offered a discount on the normal tax rate for imported goods. The discount is 30 percent off VAT and 30 percent off excise duty. Customs tariffs will also be waived on these purchases. The taxes and duties on imported items can be taxed anywhere from zero to 100 percent depending on the category.
If the single transaction value exceeds a cap of 2,000 yuan or a consumer purchases more than 20,000 yuan, or $3,075, worth of goods from overseas in a year, their cross-border e-commerce purchases will be taxed at the full rate applicable for their product category, with no discounts.
In January, China’s State Council announced plans to set up more cross-border e-commerce zones across the country, in order to foster the booming industry and boost sluggish foreign trade. In 2015, total export and import value decreased 7 percent on the year, the first time China’s foreign trade has fallen in six years.
According to China’s Ministry of Commerce, the volume of cross-border e-commerce in 2016 will reach 6.5 trillion yuan and in coming years may account for as much as 20 percent of China’s foreign trade.
China’s major platforms have also been busy pumping up their cross-border e-commerce credentials and it remains to be seen how the new tax policy will impact on their business, if at all.
A spokesman for JD.com, China’s largest direct-sales e-commerce platform said, “the company is studying the changes.”