China has one of the most mature and dynamic e-commerce market worldwide. Due to the emerging middle class in China and increased spending power of them, the demand for foreign products is rising rapidly. It is expected, that 16% of the Chinese population will do cross border e-commerce purchases in 2016, with an overall value of 86 billion US$. Cross border e-commerce can be conducted in the cities of Shanghai, Hangzhou, Ningbo, Zhengzhou, Chongqing, Guangzhou, Shenzhen, Pingtan, Yantai, Nanjing and Qingdao, as well as in the free trade zones of Tianjin and Fujian provinces. Recently, there are two options to conduct cross border e-commerce. The bonded import mode is a B2B2C option, where goods are stored in a big quantity on the Chinese territory at special customs supervision areas. After an order was placed at a suitable e-commerce platform, the service provider will send the terms of the order to the local customs bureau, where the customs clearance will be done due to the information about the product and logistics. The direct purchase import mode is a B2C option. After an order was placed at a cross border e-commerce platform, the platform will report the details of the product to the local customs authority. Meanwhile, the good will be shipped through an international delivery service to a designated cross boarder e-commerce center, where the product has to go through customs clearance procedures. This method is more time-consuming and the delivery goods will be high, however it is not necessary to rent warehouse space as in the bonded import mode.
The taxation of Chinese consumers
Every individual purchasing goods from outside China is subject to an integrated tax on cross border e-commerce products, which is composed of import tariffs, VAT and consumption tax.
If the purchasing amount is under 2000RMB per order and does not excess 20000RMB a years, the import tariff is 0%. VAT and consumption tax are levied to an amount of 70%. If the order amount exceeds the statutory thresholds, the general trade tariff has to be paid.If Chinese consumers are buying goods from foreign websites or through a purchasing agent abroad, will be charged according to the postal articles tax scheme. This tax scheme is composed of three different tax rates (15%, 30%, 60%, rate depends on product).
If Chinese consumers are buying goods from foreign websites or through a purchasing agent abroad, will be charged according to the postal articles tax scheme. This tax scheme is composed of three different tax rates (15%, 30%, 60%, rate depends on product).
Cross border e-commerce and Hong Kong
Hong Kong companies can play a crucial role in the cross border e-commerce between Chinese consumers and western enterprises. Being an international trade hub for China and the world since more than a century, Hong Kong service suppliers can offer a deep knowledge of Chinese consumer habits and can provide an excellent network in China. Also customs procedures for products sold via cross border e-commerce from Hong Kong are easier and faster. Not only cultural and political ties between Hong Kong and Mainland China are advantageous, but starting selling products to the Mainland from Hong Kong, which is a window to the west for many Chinese consumers and has a land border to the Mainland, can be the first step to launch a new product on a trial base in China.
How can we help?
- Incorporation of a Hong Kong Limited company
- Feasibility study
- Helping to find a suitable e-commerce platform in Mainland China
- Support Customs clearance and liaise with Chinese custom authority
- Evaluate the most suitable cross border e-commerce entrance model