Hello, this is Dong from ApparelX International Strategy Office.

Many of ApparelX's Japanese users are apparel brands expanding into China, but do you know how to calculate the comprehensive tax on cross-border exports from China?
This time, I would like to introduce the following contents.

1. Export cross-border EC tax policy
2. Tax incentives and tax calculation methods
   
3. Cross-border e-commerce methods you must know
4. Means of e-commerce in China
   
5. Introduction of major e-commerce malls, etc.
6. Payment etc.

Although I am not a trade professional, I would like to share with you the information I know.

(Please use the information provided in this document at your own discretion and responsibility. At ApparelX, we strive to provide as accurate information as possible, but please note that the information provided in this document Please note that ApparelX and the author will not be held responsible for any disadvantages that may arise to users.)

Export cross-border EC tax policy in China

When exporting to China, the Chinese government collects the following four taxes.

(1) Import duties on the Chinese side: Taxes imposed on imported goods passing through a country's customs territory.

(2) Transport and postal tax: Refers to import taxes on baggage and mail.

(3) Value-added tax (VAT): China sets the basic VAT rate at 17%, and 13% for nationally important goods and daily necessities.

(4) Consumption tax: Currently, the country imposes consumption tax on only four types of products. First, consumer goods such as cigarettes, alcohol, and firecrackers, whose excessive consumption is harmful to health; second, luxury brand products; third, high energy consumption products; and fourth, non-renewable petroleum. It is a consumer product that uses raw materials.

The total of these four taxes is called the electronic commerce comprehensive tax.

Tax incentives and tax calculation methods

First of all, China has a preferential tax policy for individual consumers on imported goods purchased through cross-border e-commerce. Based on the ``Notice regarding the development of tax revenue policy regarding cross-border e-commerce retail imports'' (Goods Tariff [2018] No. 49, promulgated on November 29, 2018, effective January 1, 2019), regarding the e-commerce comprehensive tax rate, 1 If the user's transaction limit is 5,000 yuan or less per transaction and the total annual purchase amount is 26,000 yuan or less, the customs duty rate will be 0%, and value-added tax and consumption tax will each be 70% of the legal amount. You can receive Please note that if the amount exceeds the above amount or does not meet the above series of applicable conditions, you will not be subject to comprehensive e-commerce tax and will be subject to customs duties at the normal rate of trade, value-added tax (consumption tax depending on imported products), etc. ) will be collected.

General calculation formula: Electronic commerce comprehensive tax = customs duty + value added tax + consumption tax

Now, we will explain how to calculate the tax within the preferential treatment limit. Within the preferential limit, the customs duty is 0, and only 70% of (value added tax + consumption tax at the import stage) will be collected!

Electronic commerce comprehensive tax = customs duty *0 + (value added tax + consumption tax at import stage) *70%

For example, if you purchase a dress for RMB 1,000 within the single transaction limit, the customs duty rate will be 0%, and value added tax and consumption tax will be charged at the legal rate of 70%.

However, if you try to buy a Chanel bag for RMB 10,000, the single transaction limit exceeds RMB 5,000, so you will have to collect the full amount of customs duty, value added tax, and consumption tax, and these taxes are charged on a minute-by-minute basis. This will be added to the price of the bag or more.

Also, even if you buy a dress for 1,000 yuan, you will still have 25,000 yuan left over within a year, and tax breaks will be applied to other products.

If you buy a lot of goods in multiple installments within a year, each time not exceeding 5,000 yuan, but the total consumption is 28,000 yuan, only 26,000 yuan will be tax-free, and the remaining 2,000 yuan worth of goods will be subject to general trade regulations. Customs duties are imposed.

Cross-border e-commerce methods you must know

This article by JETRO is very detailed and we think it is very valuable, so please refer to this article.

Overview and points to note about cross-border EC in China: Export to China

Means of e-commerce in China

1. Sales through our own mail order site from our base established in China

2. Sales to China by a foreign corporation through an overseas mail order site

3. Open a store on a Chinese EC (Electric Commerce) site

There are three possible methods.

(Source: JETRO)

China cross-border EC market share ranking

Considering the difficulty and risk of the three methods above, I believe that "3. Opening a store on a Chinese EC (Electric Commerce) site" is the lowest. I would like to introduce you to our EC site.

1.Tmall International (Recommended for apparel brands)

Market share: 39.6%

Tmall International, which opened in 2014, is currently China's largest cross-border e-commerce platform for international brands. Tmall International only accepts companies with physical presence outside China and is not open to mainland Chinese companies. We provide a platform solution that combines a model in which Alibaba directly imports and sells products (B2B2C) and a model in which companies open their own stores (B2C). Over the past five years, Tmall International has become a trusted platform for consumers to purchase imported products.

2.Consider shipping

Market share: 25%

Khao Lak is a relatively new player in the cross-border e-commerce market. In the fall of 2019, Alibaba acquired Caola, and Tmall International + Caola team became China's leading cross-border e-commerce player.

3.Kyoto East International

Market share: 20.1%

To compete with Alibaba, Tencent established Jingdong International to compete in the cross-border market. Jingdong International was launched in 2015 and has successfully leveraged Jingdong's large existing user base in China's two largest markets.

4.Yishinkai (Yishinkai) (Recommended for apparel brands)

Market share: 8.6%

Founded in 2008, Vipshop pioneered an innovative e-commerce model in China of "Brand Name Discounts + Limited Time Shopping + Authenticity Guarantee", offering "Carefully Selected Brands + Big Discounts + Limited Time Shopping" of authentic fashion outlet. The model continues to deepen. It is an electronic shopping mall specializing in fashion items such as apparel and accessories.

5.Amazon Global Purchase

Market share: 2.5%

Amazon.com International Edition provides customers with the opportunity to purchase foreign brands and imported products on Amazon, and is committed to providing consumers with a more convenient, efficient and reliable international shopping experience.

About payment

“Alipay” In addition to cash on delivery and bank transfer, payments using online payment services such as “Alipay” and “WeChatPay” and UnionPay cards (debit cards) are generally popular in China. (Credit card usage seems to be on the decline).

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