China's Cross-Border E-Commerce Tax Policies
Cross-border e-commerce (CBEC) is gaining momentum in China. Over the last several months, the Chinese government has been rolling out policies, including adding new CBEC pilot zones and pilot cities for CBEC retail importation, extending the CBEC retail import list, and lowering tax and tariffs.
The CBEC pilot zones are designed to boost import and export businesses. In addition, the CBEC can also help foster new industrial chains like cross-border logistics, cross-border financial payment, and supply-chain finance, accelerating economic growth in China.
The Chinese government has also rolled out favorable tax policies for in-zone e-commerce export enterprises that are applicable nationwide:
CBEC retail export “duty free” policy
According to the Notice on Tax Collection Policies for Retail of Exports in CBEC Pilot Zones released by the Ministry of Finance and the State Taxation Administration (STA) in 2018, in-zone e-commerce export enterprises that have not obtained a valid proof of purchase (like input value-added tax invoice) are still allowed to be exempted from value-added tax (VAT) and consumption tax (CT) when exporting goods if they meet certain criteria.
CIT verification and collection policy
According to the STA Announcement on Issues Concerning the Levy upon Assessment of Income Tax on Retail Export Enterprises in CBEC Pilot Zone, released in 2019 and taken effect on January 1, 2020, the in-zone e-commerce export enterprises who meet certain criteria – corporate income tax (CIT) will be assessed and levied with a taxable income rate of 4 percent.
Furthermore, small low-profit enterprises may enjoy preferential CIT policies if they meet the conditions in addition to the aforementioned treatments. If the income of an enterprise is less than the amount of tax-free income as stipulated in Article 26 of the Corporate Income Tax Law of China, the CIT on such income can be exempted.