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  • Tax changed in Cross-border e-Commerce of China, nightmare or new opportunity?

    Post by : expatree

Since April 8, 2016 new tax rate of Cross-border e-Commerce brought amounts of public attention, the hottest topic is “more expensive or cheaper” has to be paid for cross-border products. Because “50 RMB tax free” is cancelled, this perks disappear means lower unit price suddenly becomes a disadvantage that no one would buy it. Generally speaking the actual payment affected by new tax rate, still depends on product category. Simply put a word, there is a comparison table for a reference,


First of all, a whole picture of retail pricing in cross border ecommerce platform is changed from low to high level, it’s estimated average 15% to 50% increase at each product. Take advantage of old tax benefit, FMCG products such as baby formula, baby diapers and low-end cosmetics etc. occupied most market share, short product lifecycle and high repurchase rate generate huge visit traffic, results in higher GMV sales volume compared to other product categories. However, as long as extra tax cost is added, this strategy seems not work anymore; it makes local Chinese consumers start to shift their eyes on high value product above 500 RMB, rather than those between 100 to 500 RMB.
 
We also have to pay attention on “3 limitation” statement in new tax rate policy. One good news that every order payment quota has been up to 2000 RMB but it was 1000 RMB. Second limitation indicates that the maximum personal consumption should be 20,000 RMB a year, the reason might be economic protectionism of local ecommerce market, but it’s still not convincible to public, obviously this regulation violates a principle of demanding and supply capability relation on cross-border products in China. Furthermore, the last limitation must be a nightmare for high-end foreign brand supplier and their local fans, because all products with unit price above 2000 RMB will never enjoy cross-border business privileges, instead it has to go for traditional import trading procedure. No matter foreign supplier or local brand agency has to struggle against Chinese custom complicated administration and higher tax cost again. But in the other hand is it a trending opportunity that local Chinese has to travel oversea for buying high-end products?
 
To our opinion, this new tax policy would shuffle the economic deck on cross-border business in China, hurting some unhealthy competition for example “pricing war” and “overstocked products” even as it could free up space to create new economic opportunities.
 
Date:2016-07-27 10:17:39
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