(Source: https://pltfrm.com.cn)
Foreign companies involved in cross-border e-commerce in China should be aware of several special Value-Added Tax (VAT) considerations. The Chinese government has implemented specific regulations to adapt to the growing e-commerce sector, including cross-border transactions. Here are the key VAT considerations:
- VAT Rates: The standard VAT rate in China is typically around 13% for goods and 6% for services. However, for cross-border e-commerce, there might be different rates applicable depending on the type of products or services sold, as well as specific regulations targeting e-commerce activities.
- VAT Exemption for Small Consignments: China has implemented a policy that allows for VAT (and consumption tax) exemptions on imported goods purchased through cross-border e-commerce platforms, provided the value of the single transaction does not exceed a certain threshold and the annual transaction value per individual does not exceed a specified limit. This is often referred to as the “cross-border e-commerce retail import” policy.
- Special VAT Fapiao Requirements: In China, the issuance of a special VAT invoice (fapiao) is a critical component of the VAT system. Foreign e-commerce companies must ensure they comply with fapiao requirements, which might involve partnering with local entities or using special platforms that can issue these invoices.
- VAT Refund Policies: There are scenarios in cross-border e-commerce where the seller might be eligible for a VAT refund. This usually depends on the nature of the goods, the transaction, and the fulfillment model (such as shipping from overseas versus from a bonded warehouse in China).
- Bonded Warehouse Model: Foreign companies using bonded warehouses in China for their e-commerce operations might benefit from deferred VAT payments. Goods stored in bonded warehouses are considered to be outside China’s customs territory, and VAT is payable only when the goods are sold and leave the warehouse.
- Consumer Paying VAT: In many cross-border e-commerce transactions, VAT and any applicable customs duties are paid by the consumer upon receipt of the goods. The e-commerce platform or logistics provider often facilitates this payment.
- E-commerce Platform Responsibilities: If a foreign company uses a Chinese e-commerce platform, the platform might take on certain tax responsibilities, including collecting and remitting VAT. It’s important to understand the agreement with the platform regarding tax liabilities.
- Digital Services VAT: For digital services provided via cross-border e-commerce, there may be specific VAT considerations based on the nature of the service and the mechanism of delivery and payment.
- Registration for VAT: Foreign e-commerce companies may need to register for VAT purposes in China, either directly or through an intermediary, depending on their business model and the extent of their economic presence in China.
Given the complexity and the evolving nature of regulations in this area, it is advisable for foreign companies engaged in cross-border e-commerce in China to seek up-to-date advice from tax professionals familiar with Chinese VAT laws and e-commerce regulations. This ensures compliance and an understanding of potential tax liabilities and benefits in the context of their specific business model.
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!
