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China reduces the cross-border e-commerce enterprises’ costs for returned goods

In an effort to support the development of new forms of foreign trade, the Chinese Ministry of Finance (MOF), jointly with the General Administration of Customs and the State Taxation Administration, announced the decision to reduce the cross-border e-commerce enterprises’ costs for returned goods.

The Announcement on Tax Policy for Goods Returned from Cross-border E-commerce Export, issued at the beginning of the year, lowers the threshold for goods returned from cross-border e-commerce export being exempted from import tariffs.

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Import duties, import value-added tax (VAT) and consumption tax would be exempted for goods (excluding food) of which exporters declare export under the cross-border e-commerce Customs supervision codes within one year from January 30, 2023, and that are returned in their original condition within six months from the date of export due to unsalable and return reasons.

According to the Announcement, these goods are exempt from import duties and the VAT and consumption tax in import links; export duties levied at the time of export are allowed to refund, and the treatment of VAT and consumption tax levied at the time of export is implemented concerning the relevant tax regulations for the return of domestically sold goods.

For goods that meet these provisions, if export tax refunds have been completed, enterprises shall make up the refunded taxes in accordance with the current provisions. Enterprises shall apply for exemption from import duties and the VAT and consumption tax in import links, and refund of export duties with the "Certificate of Tax Arrear Payment/No Tax Refund for Exported Goods" issued by the competent tax authorities.

The document further clarifies that "returned in original conditions" refers to that when being returned to China, the exported goods shall be basically the same as their original condition when exported, they shall not be added any accessories or parts, and shall not be subject to any processing or modification.

Goods after unpacking, inspection (chemical experiment), installation and debugging can still be deemed as “in original conditions”. However, they must not have been used, except for cases where only after trial they are found to be of poor quality or be proved to have been returned after trial by the customers.

Companies must present a list of exported goods declaration or export declaration, the reasons for the return of the goods and other documents to prove that the goods are indeed returned to China due to demurrage or return of goods.

For goods returned due to demurrage, enterprises shall provide a "self-declaration" as a document explaining the reason for the return of goods. For other returns, enterprises shall provide records (including return records or rejection records on cross-border e-commerce platforms), goods return agreements, etc. as documents explaining the reason for the return.

It is advised that companies handle the return of goods correctly to be able to benefit from the tax exemptions and avoid irregularities, such as tax evasion and fraud.


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