China To Change Its Online Retail Purchase Tax Rules
$AMZN
China will change the tax rules on online retail goods beginning on 8 April to level the playing field for e-Commerce platforms and traditional retailers and importers.
Retail goods purchased online will no longer be classified as “Parcels,” which enjoy a “Parcel Tax” rate, lower than that on other imported goods. Instead, online purchases from Overseas will be charged in the same way as any other imported goods, the Ministry of Finance (MOF) announced last Thursday.
“Parcel tax is not for trade purposes, which is exactly what online retailing is. It is unfair to conventional importers and domestic producers,” said Zhang Bin of the Chinese Academy of Social Sciences.
China levies parcel tax on imported goods worth less than RMB 1,000 (US$150), and the rates is mostly 10%. Taxes under RMB 50 are waived.
As demand for overseas goods grows, online purchasing agents have taken advantage of parcel tax and used new methods such as re-packaging and mailing products separately to avoid tax.
The new policy only allows a maximum of RMB 2,000 per single cross-border transaction and a maximum of RMB 20,000 per person per year. Goods that exceed these limits will be levied the full tax for general trade, the MOF said.
According to a Y 2015 survey by Amazon China (NASDAQ:AMZN) on online imports, most buyers are under 35 and around 90% have a college education. More than 50% earn more than RMB 5,000 per month.
The new policy will speed up customs clearance so consumers will receive most orders from overseas within 2 weeks, instead of the current 2 months.
Cross-border e-Commerce has been booming in China. The country plans to set up more cross-border e-Commerce pilot zones to attract businesses, create jobs and nurture new business models that will boost foreign trade and stimulate the economy, the State Council announced in January.
The expansion of the pilot zones came at a time when the country is facing sluggish foreign trade. Total export and import value for Y 2015 decreased 7% Y-Y, falling for the 1st time in 6 years.
The Ministry of Commerce predicted the volume of cross-border e-Commerce in Y 2016 will reach RMB 6.5-T, and will soon account for 20% of China’s foreign trade.
Stay tuned…
HeffX-LTN
Paul Ebeling
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