Since March 2015, China’s State Council has approved the set up of 13 cross-border e-commerce comprehensive pilot zones (CECPZs) in Tianjin, Shanghai, Chongqing, Hefei, Zhengzhou, Guangzhou, Chengdu, Dalian, Ningbo, Qingdao, Shenzhen, Suzhou and Hangzhou (see KPMG China Tax Weekly Update (Issue 2, January 2016) for details). The export and import of goods through these zones is facilitated by a range of policies, making these gateways for China’s cross-border e-commerce traffic.
Taking a further step, at an executive meeting of the State Council on 13 July 2018, Premier Li Keqiang announced that China will set up more CECPZs in 22 cities, bringing the total number to 35. These include Beijing, Hohhot, Shenyang, Changchun, Haerbin, Nanjing, Nanchang, Wuhan, Changsha, Nanning, Haikou, Guiyang, Kunming, Xi’an, Lanzhou, Xiamen, Tangshan, Wuxi, Weihai, Zhuhai, Dongguan and Yiwu.
This is in line with the decision made by the State Council in September 2017 to extend the successful roll out of existing CECPZs to more cities across China. The intent of this expanded policy is to:
(see KPMG China Tax Weekly Update (Issue 38, September 2017) for details).
It is anticipated that more cities will be selected as CECPZs, and eventually the pilot program will be extended to the whole country.
In 2016, the Ministry of Finance (MOF), State Administration of Taxation (SAT) and General Administration of Customs (GAC) jointly issued Cai Guan Shui  No. 18 (“Circular 18”) setting out a new import tax policy for cross-border B2C e-commerce. Circular 18 requires that e-commerce B2C imports shall be deemed as “goods” rather than “postal articles” and be subject to Import Customs Duty, Import VAT and Import Consumption Tax (see KPMG China Tax Weekly Update (Issue 12, April 2016) for details).
Prior to the introduction of this system, the taxation of e-commerce B2C imports had been less well administered, with items subject to a postal tax for which collection mechanisms were somewhat deficient. The new system facilitates e-commerce B2C import clearance, at the same time as it leverages e-commerce platform support to collect tax.
To implement the new policies, in 2016 the MOF and ten other authorities jointly issued two lists of retail goods permitted for import in cross-border e-commerce transactions (“Permitted Import Lists”):
In response to the complexity created by the limited number of products on the initial lists, the State Council has repeatedly (on four occasions) approved deferrals for implementing the requirements set out in the Permitted Import List. The requirements have now been suspended until the end of 2018 (see KPMG China Tax Weekly Update (Issue 38, September 2017) for details).
Read the following KPMG publications on the Circular 18 import tax policies for cross-border e-commerce:
On 18 July 2018, at an executive meeting of the State Council, Premier Li Keqiang announced measures to cut red tape and facilitate business:
As highlighted in KPMG China Tax Weekly Update (Issue 28, July 2018), the MOF and SAT on 11 July 2018 jointly issued Cai Shui  No. 77. This clarifies that from 1 January 2018 to 31 December 2020, eligible small enterprises whose taxable income falls under RMB1 million, may qualify for a reduced 10% effective corporate income tax (CIT) rate. Under this incentive, 50% of their income is taxed at a CIT rate of 20%. The threshold was previously RMB500,000.
Subsequently, on 13 July 2018, the SAT issued Announcement  No. 40 (“Announcement 40") further clarifying CIT collection matters:
At the request of the G20, the Platform for Collaboration on Tax (PCT), which is a joint initiative of the IMF, OECD, UN and World Bank Group, has been preparing a series of "toolkit" reports. These are intended to help guide developing countries in the implementation of international tax policies options of greatest relevance to such countries. This includes taxation of offshore indirect transfers (OITs) of assets, for which a new draft toolkit has recently been released.
The PCT previously sought, before October 2017, public feedback on a prior draft of this report (see KPMG China Tax Weekly Update (Issue 32, August 2017) for details). That draft generated significant interest and comments, now reflected in the new draft. Comments are sought by 24 September 2018.
This report and toolkit concludes that:
There is considerable diversity in how countries are approaching the taxation of OITs. Most OECD countries follow the OECD MTC, but not all; US, Peru and China are all noted to deviate from both the OECD and UN MTCs.
China’s SAT has issued guidance to regulate offshore indirect transfer of assets: