Industry Trend Analysis - Luxury Retail, Cross-Border Specialists Most Exposed Under New E-Commerce Tax - MAY 2017

BMI View: In a bid to clamp down on cross-border commerce and encourage domestic consumption, the Chinese government has introduced a new tariff policy that will threaten a number of consumer sub-sector imports , with l uxury retail being among the more prominent examples. Conversely, cosmetics could be an area that will benefit from the new structure.

The Ministry of Finance, General Administration of Customs and State Administration of Taxation released Cai Guan Shui (2016) No.18 on March 2016 pertaining to the adjustment of China's tax policy on cross-border business-to-consumer (B2C) e-commerce. From April 8 2016, purchases from abroad that fall below CNY2,000 (USD310) will be exempted from customs duties, but will incur a new sales tax of 11.9%. This rate is still lower than the 17% VAT applied to purchases in physical stores, and is expected to create fairer competition between cross-border e-commerce and traditional retailers.

E-commerce firms were previously given preferential tax treatment in that they were only required to pay parcel tax on their imports made through thirteen zones: Hangzhou, Tianjin, Shanghai, Chongqing, Hefei, Zhengzhou, Guangzhou, Chengdu, Dalian, Ningbo, Qingdao, Shenzhen and Suzhou. However, the new tax will lead to higher prices for certain product types, which could impact both consumer demand and e-commerce players.

Boom In E-Commerce Fuelled By Mobile Users
China - E-Commerce Users ('000)
Source: CNNIC

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