Impact of New Integrated Tax for Cross-Border E-Commerce on Consumers

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Cross-border E-commerce has become more and more popular in China. According to data from the government department, the number of China’s haitao shoppers is predicted to increase from 18 million in 2014 to 35.6 million by 2018. To further regulate cross-border E-commerce, the Chinese government announced its new tax policies for cross-border e-commerce and list of cross-border e-commerce retail imports in April 2016.

Subject to an Integrated Tax Rate
Previously, cross-border e-commerce platforms cleared Customs according to personal postal articles tax regulations and purchases were eligible for an Rmb50 duty-free allowance. Today they are subject to an integrated tax at a rate of 11.9% for most items, which is lower than the adjusted personal postal articles tax rates and the integrated tax rate for goods imported under general trade. Objectively speaking, the overall tax burden is higher for consumers after the switch to integrated tax than before when the imported goods cleared Customs according to the pre-adjustment personal postal articles tax. In reality, the actual tax burden depends on the types of goods.

Exemption from Custom Checks
The departments concerned recently announced a transitional period to address this problem. Quoting an official in charge of the Tariff Department, the Ministry of Finance pointed out on its website that with the approval of the State Council, a one-year transitional period will be offered for supervision requirements stipulated in the List of Cross-Border E-Commerce Retail Imports (both the first and second batches). Until 11 May 2017, "bonded imports" entering the bonded zones in the 10 cross-border e-commerce pilot cities will be exempted from checks of their Customs Clearance Certificates. Import permits, registration or filing will not be required for first-time imported cosmetics, baby formula, medical equipment and special food products (including health food products and food for special medical purposes). Import permit, registration or filing requirements will also be exempted for "direct purchase imports".

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