China to Impose Tax on CBEC Traded Goods from 8 April 2016

On 24 Mar 2016, China Ministry of Finance together with General Administration of Customs and State Administration of Taxation jointly announced the pending levy of a new import tax on CBEC commodities from 8 Apr 2016. The new tax is designed to level the playing field between traditional retail channels and foster fair market competition.

Currently, CBEC commodities are mainly regarded as personal goods and only subject to personal postal article tax. Personal article tax is not a general tax for general imported goods but a combination of three taxes, namely tariff along with value-added tax and consumption tax. The tax rate is much lower than the normal import tax. Currently if the personal postal article tax is lower than 50 RMB, the tax is waived. The tax incentives extended to CBEC retailers has been a major reason for the growth witnessed in this sector.

The new tax regulation sets limits on the permitted total value of individual consumer transactions and also imposes limits on the aggregated annual purchasing total for all goods purchased via CBEC. In addition, it also specifies the new tax system for CBEC goods.

Two limits:

1. The value of a single order should not exceed 2,000 RMB;
2. The value of personal annual purchasing should not exceed 20,000 RMB.

Tax 1 : tariff (with the limit)

Products within the restricted value are exempt from tariff.

Tax 2: value-added tax and consumption tax during importation (within the limit)

70% of the two taxes for general imported goods

Some categories such as foods and beverages do not have consumption tax so they will be subject to 70% of the value added.

CBEC commodities will be subject to full tax (tariff + value-added tax + consumption tax) under the following two conditions:

• The values exceed the above-mentioned two limits;
• The value of single products (which means they cannot be further separated for individual resale) exceed 2,000 RMB, such as luxury bags, watches, etc.

The government will publish a list of commodities for retail imported through CBEC in the near future. All these commodities should fall under the new tax scheme but those not imported through CBEC channel are still unregulated and subject to personal postal article tax only.

In the meantime, the announcement also adjusts the tax rate of personal postal article tax:

The spokesman of Ministry of Finance stated that the new tax policy is aimed at making the tax burden of emerging industries and traditional industries as well as domestic products and international products more equitable.

“Setting the maximum transaction size of a single deal and the individual annual maximum transaction size is for the purpose of reducing the impact on general trade and avoiding disorder of the market.” The spokesman of Ministry of Finance explained, “It should meet the consuming needs of general middle-income families also.”

In addition, the customs clearance period is promised to be shortened. Chinese consumers’ legitimate rights and interests will be guaranteed because of the complete information and traceability of the products.