Introduction to Adjustments in Retail Import Tax Policy for Cross-border E-commerce

Following the approval of the State Council, the Ministry of Finance, the General Administration of Customs and the State Administration of Taxation jointly issued on 24 March a Notice Concerning Retail Import Tax Policy for Cross-border E-commerce (the Notice). The Notice, aiming to make adjustments to the retail import tax policy for cross-border E-commerce, is effective from 8 April. A complementary “List of Cross-border Electronic Commerce Retail Imported Commodities” was also announced and they come in two batches, totalling 1,293 types of products (the first and second batches comprised of 1,142 and 151 types of goods respectively).

Highlights of the adjustments to the tax policy include:

1. Commodities under the criteria of the “List of Cross-border Electronic Commerce Retail Imported Commodities” are eligible for overseas direct mailing, and distributed through online purchase operators’ bonded warehouses in cities chosen as pilot cities for the development of cross-border E-commerce. The positive list of the two batches include most types of imported cross-border E-commerce goods, but certain restrictions have been imposed on some of the products, including:

a) A formula registration certificate for the related imported infant formula is not required in the interim. Starting from 1 January 2018, a formula certificate is required for the sales of infant formula on the Mainland.

b) According to the appendix to the positive list, raw products and liquid milk are not allowed to be distributed through the business model of bonded online purchase.

c) Approval documents issued by the China Food and Drug Administration are required for cosmetics that are imported into Mainland China for the first time.

d) Starting from 1 July 2016, first-time imports of health food by a cross-border E-commerce operator have to be registered with the China Food and Drug Administration; companies also need to file a record with the China Food and Drug Administration regarding any vitamins or mineral supplements they import for the first time into Mainland China.

2. The new adjustments to the import tax policy have confirmed the trading” nature of the cross-border E-commerce retail import business; whereby the business should be managed as a trade instead of g as the “mailing of personal articles”. The cross-border E-commerce retail imports are subject to import tariff duties as well as value added tax (VAT) and consumption tax in Mainland China. Previously, these imported goods were taxed with reference to the tax rate of personal articles and postal items. The temporary tariff rate of 0% is applied to cross-border E-commerce retail goods imported; import VAT and consumption tax will no longer be exempted and will be levied temporarily at 70% of statutory taxable amounts.

a) Consumption tax = [(Duty paid value + Tariff amount) / (1- Consumption tax rate)] x Consumption tax rate x 70%

b) Import VAT = (Duty paid value + Tariff amount + Consumption tax amount) x VAT rate x 70%

3. The limit for a single transaction of imported cross-border E-commerce retail goods is RMB2, 000, and the cumulative limit for an individual’s yearly transactions is RMB20, 000. The cumulative limit is counted from 8 April 2016 onwards. The relevant taxes will be charged in full on any transactions exceeding the single-transaction limit or the cumulative annual limit for goods whose dutiable value exceeds RMB2, 000.

4. A parcel tax scheme still applies to personal- use goods that are not imported via cross- border E-commerce platforms or goods that cross-border E-commerce operators fail to provide trade, payment and logistics. Parcel taxes on goods amounting in value to under RMB50 have been waived, but the tax rates have been reduced from four levels (10%, 20%, 30% and 50%) to three levels (15%, 30% and 60%). For details, please refer to the tax tariff list of imported goods published by the General Administration of Customs of the People’s Republic of China.

5. Tax refunds are available if imported cross-border E-commerce retail goods are returned within 30 days after the goods have been approved by the Customs. Where such returns and refunds occur, the cumulative limit for an individual’s total transaction volume for the year concerned can be adjusted accordingly.

References:

  1. Circular on Import Tax Policy for Cross- Border E-commerce Retail Goods:
    http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201603/t20160324_1922968.html
  2. List of imported cross-border E-commerce retail goods:
    http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201604/t20160401_1934275.html
  3. List of imported cross-border E-commerce retail goods (second group):
    http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201604/t20160415_1952574.html
  4. Classification table and tax tariff list of imported goods
    http://www.customs.gov.cn/publish/portal0/tab49564/info793662.htm