On March 24, 2016, the MOF, the General Administration of Customs (“GAC”) and the SAT jointly released Circular Cai Guan Shui [2016] No. 18 (“Circular 18”) on tax policies for crossborder e-commerce retail imports (business-to-consumer) in China, effective on April 8, 2016.

In recent years, crossborder business-to-consumer e-commerce has boomed in China, outgrowing existing customs regulations. The absence of proper regulations entailed a loss of tax revenue owing to the application of the tax exemption policy for personal item imports. The release of Circular 18 shows that China is starting to pay closer attention to these rapidly developing new business models.

The highlights of Circular 18:

  1. The import of e-commerce retail goods is treated as import of goods and levied with customs duty (“CD”), import VAT and consumption tax (“CT”). The tax base is the actual transactional price, including retail price, transportation cost and insurance.

The individual consumer is the taxpayer, and the e-commerce enterprises, e-commerce trading platform enterprises and logistic enterprises are withholding agents.

  1. E-commerce retail goods must be imported from other countries or regions and included in the Commodity Catalogue of Crossborder E-commerce Retail Imports (which will be released shortly), and meet one of following conditions:
    1. They must have been purchased through an e-commerce trading platform connected with the customs network so that information on transaction, payment and logistics can be cross-checked.
    2. If not purchased through the e-commerce trading platform connected with the customs network, the express delivery and postal companies can provide information on the transaction, payment and logistics, and assume the corresponding legal responsibilities.
  1. Circular 18 sets new cap values at RMB 2,000 for single purchases and RMB 20,000 for accumulated annual purchases by the same individual.

For goods purchased below the cap values, CD rate is 0%, and VAT and CT are levied on 70% of the tax base.

For goods purchased above the cap values for single purchases or aggregate annual personal purchases, taxes are levied according to the general rules for import of goo ds.

If consumers return the goods within 30 days after customs release, they can claim a tax refund and adjust their annual cap value accordingly.

  1. Consumer identity will be verified for purchases; otherwise, the consumer will be identified as the payer.

Before the release of Circular 18, import activities were divided into items for personal use and goods for commercial purposes. In turn, under the GAC’s Announcement [2010] No. 43,3 a tax exemption applied on personal items imported by post with a tax payable amount not exceeding RMB 50. Also, the GAC set cap values for personal imports by post at RMB 800 per import from Hong Kong, Macau and Taiwan, and RMB 1,000 per import from other countries or regions. Personal articles exceeding the cap values would either be returned or imported as goods (through an import agent instead of the individual consumer), unless consisting of a single indivisible article that customs had confirmed to be for personal use. This regulation will still govern personal items imports that do not meet the conditions of Circular 18.

Date of issue: March 24, 2016. Effective date: April 8, 2016