(Source: https://pltfrm.com.cn)
Income generated from e-commerce platforms operated by foreign companies in China is subject to a range of taxes. The Chinese tax system has evolved to adapt to the growth of e-commerce, and there are specific rules that apply to online transactions. Here are the main tax considerations:
- Corporate Income Tax (CIT): Foreign companies earning income from e-commerce operations in China are subject to CIT. The standard CIT rate is about 25%. If the company is deemed to have a permanent establishment in China, it will be taxed on all China-sourced income. Without a permanent establishment, the company may still be liable for CIT on income sourced in China.
- Value-Added Tax (VAT): Sales through e-commerce platforms are subject to VAT. The standard VAT rate can vary, but for most goods it’s around 13%, and for services, it’s generally 6%. Foreign e-commerce companies must carefully consider how VAT applies to their transactions, including issues related to VAT invoicing (fapiao).
- Withholding Tax: If the foreign e-commerce company does not have a permanent establishment in China, income from e-commerce sales might be subject to withholding tax. The rate is typically around 10% for royalties or service fees but can vary depending on the nature of the e-commerce income and any applicable double taxation agreement (DTA) between China and the company’s home country.
- E-commerce Platform Requirements: If a foreign company uses a Chinese e-commerce platform, the platform may have obligations to withhold and remit taxes on behalf of the seller. The specifics can depend on the platform’s policies and the legal agreements in place.
- Cross-Border E-commerce Regulations: For cross-border e-commerce, there are specific tax rules. This might include exemptions or preferential policies for import VAT and customs duties for goods sold through cross-border e-commerce channels.
- Digital Services: If the e-commerce platform provides digital services, different tax rules might apply compared to physical goods. This can include issues related to the location of the service provision and the determination of the taxable entity.
- Transfer Pricing: For multinational companies involved in e-commerce, transfer pricing rules are an important consideration. Transactions between the foreign company and its Chinese subsidiaries or related entities should adhere to the arm’s length principle.
- Consumer Data and Privacy Regulations: While not directly related to taxation, compliance with China’s data protection and privacy laws, especially under the Personal Information Protection Law (PIPL), is crucial for e-commerce operations.
Given the complexity and evolving nature of e-commerce taxation, it’s advisable for foreign companies to consult with tax professionals or legal advisors familiar with Chinese tax law and e-commerce regulations. This will ensure compliance and an understanding of potential tax liabilities and benefits.
PLTFRM is an international brand consulting agency that works with companies such as Red, Tiktok, Tmall, Baidu, and other well-known Chinese internet e-commerce platforms. We have been working with Chile Cherries for many years, reaching Chinese consumers in depth through different platforms and realizing that Chile Cherries exports in China account for 97% of the total exports in Asia. Contact us and we will help you find the best China e-commerce platform for you. Search pltfrm for a free consultation!
