Challenges and risks of cross-border e-commerce
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2016 Shanghai Pilot Free Trade Zone (Shanghai FTZ) Strategic Round Table was recently held in Shanghai. Deloitte Chinese Services Group sponsored this meeting. Deloitte Tax Director, Ms. Zhang Xiaojie shared with the audience her observations of policy benefits of Shanghai FTZ and challenges facing cross-border e-commerce.
It is anticipated there will be significant changes to the Cross Border E-Commerce tax and regulations will be issued very soon at a national level. Favourable tax policies which have been introduced in Shanghai FTZ include: 1. selective imposition of tariffs on goods for domestic sales; 2. income tax deferral for asset restructurings such as outbound investment with non-monetary assets; 3. instalments of individual income tax on equity incentives. Meanwhile, on the national level, e-commerce also receives comprehensive support in terms of foreign exchange, inspection & quarantine and customs.
The advantages of e-commerce operating in Shanghai FTZ include:
Partnership with domestic platforms and websites which have established connectivity with systems of the customs and inspection, setting up online shops
A package of solutions to customs clearance, commodity inspection, taxation, foreign exchange for cross-border e-commerce companies
Declare goods at customs as personal postal articles and deliver goods to the hands of consumers from tariff-free zones
Stock and prepare goods through channels of general imports and exports
However, cross-border e-commerce faces risks in different stages of development, such as imperfect legal systems, online payment security, the absence of credit evaluation and guarantee system, logistics problems and the complexity of tax issues. As for tax, in the early stage of cross-border e-commerce operation, analyse the market entry mode and weigh the tax considerations of different channels; during the growing period, refer to best industry practices for benchmarking and tax optimization, optimize the supply chain management in terms of tax and attach importance to tax factors in M&A transactions. In a sophisticated stage, tax risk controls and optimization are the main focus of enterprises. In operations, the cross-border e-commerce enterprises could seize opportunities, manage risks and address challenges through focusing on three flows of goods, transactions and funds.
For more information, please contact GCSG@deloitte.com.cn.