The Chinese Ministry of Finance announced in November a new set of regulation affecting cross-border purchases. The new rules will take effect on the 1st of January 2019.
What are these new regulations, and how will they affect you?
The main change of the new regulation is the increase of the cut-off amount for tax-free cross-border purchases:
- Single-transaction amount increased from 2,000 RMB ($291 USD) to 5,000 RMB ($727 USD)
- Yearly amount of cross-border purchases increased from 20,000 RMB ($2,909 USD) to 26,000 RMB ($3,782 USD)
Within these limits, customers won’t pay any import tariffs, and will have their import VAT and consumer tax collected at 70% of the statutory taxable amount.
In practice, this reform opens up the cross-border market for a lot of luxury retailers with products in the 2,000 to 5,000 RMB range. For industries such as high-end fashion and cosmetics which strongly appeal to Chinese cross-border buyers, this is a game-changing move.
63 new items categories were added to the positive list for cross-border purchases. The new allowed categories notably include sparkling wine, beer, health care products, and fitness equipment.
The full list of allowed items (in Chinese) can be found here.
The cities included in this cross-border tax-rebate were expanded from 15 to 37 cities.
The full list of cities covered by the cross-border policy is: Beijing, Tianjin, Shanghai, Tangshan, Hohhot, Shenyang, Dalian, Changchun, Harbin, Nanjing, Suzhou, Wuxi, Hangzhou, Ningbo, Yiwu, Hefei, Fuzhou, Xiamen, Nanchang, Qingdao, Weihai, Zhengzhou, Wuhan, Changsha, Guangzhou, Shenzhen, Zhuhai, Dongguan, Nanning, Haikou, Chongqing, Chengdu, Guiyang, Kunming, Xi’an, Lanzhou, Pingtan
The reform also stresses out the fight against “Daigou”: people buying a product tax-free oversea and then re-selling it online or offline on the local market.
The new regulation insists strongly on the fact that cross-border purchases are final, and that then re-selling these products in China would be illegal.
This new regulation is a part of the collective effort China is making to expand its import market and drive internal consumption.
Early in July, China identified 22 cities as the cross-border e-commerce pilot zones. In September China started to cut admin charges and expedite cargo clearance to incentivize global trade. In November 1st, China implementted a tariff cut on 1,585 imported goods.
In November, China also held the first China International Import Expo that attracted 2,800 brands from 130 countries.
With an increase in tariff-free purchases cap, the number of categories in the positive list and a wider city coverage, this new regulation update is great news for all companies shipping to China.
The news is especially good for high-end fashion companies, or cruelty-free cosmetic companies wanting to sell to China cross-border, which will most benefit from the ability of customers to make larger orders.