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China's e-Commerce Tax Changes Come Into Effect

by Mary Swire,, Hong Kong

12 April 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.

TAGS: tax | value added tax (VAT) | sales tax | commerce | tariffs | China | ministry of finance | e-commerce | import duty | regulation | retail | trade | Tax

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