China overhauls tax rules on imported goods sold online, making cosmetics cheaper for buyers

China overhauls tax rules on imported goods sold online, making cosmetics cheaper for buyers

Foreign cosmetics brands among goods likely to be better value for shoppers after changes, says analysts 

China is changing tax rules for imported goods that are sold online in a move that will see beauty products such as eye creams and moisturising gels from L’Oréal’s Lancome and Korea’s Amorepacific becoming cheaper for Chinese consumers.

The government will remove a special tax, or so-called parcel tax, that was previously levied on imports sold online. Instead, it will charge value-added and consumption duties that are currently imposed on most products sold in China, but with a 30 per cent discount, according to a Thursday statement posted on the website of the Ministry of Finance.

China slashes tax on foreign goods to help boost slowing economy

The move came after China broadened in January a pilot programme in which a port district in the eastern city of Hangzhou was allowed to trade imported goods at lower taxes.

As the world’s second-largest economy pushes its online retail industry and promotes the so-called “cross border e-commerce”, the country has expanded the programme to 13 cities.

China’s State Council approved the latest changes which will come into effect on April 8, according to the Thursday statement.

“Cosmetics will be the biggest beneficiary after the tax adjustment,“ said Catherine Tsang, a Hong Kong-based tax partner at PricewaterhouseCoopers.

As beauty and personal care was one of the most popular categories among imports bought by China’s internet shoppers any price cuts would further boost the market, Tsang said.

Riding on a wave of popularity from South Korea’s TV dramas and music, Amorepacific’s Etude House and other brands from the country are in demand among Chinese customers.

For Korean products, cross-border e-commerce had become a more direct and cheaper way to expand in China compared with setting up store networks, Tsang said.

Online sales of imported goods have grown at a compounded rate of 63 per cent in the five years to 2015, reaching 638 billion yuan (HK$759 billion) and accounting for 17 per cent of China’s total online retail sales, according to data from Mintel Group.

The most popular categories of products purchased online in China are consumer electronics, clothing and shoes, appliances, food and beverages, and beauty products, according to research firm Euromonitor International.

While food and baby items such as nappies might cost more after the April adjustments because of their current lower tax rates, those imports might remain attractive as China’s growing middle-class were becoming more concerned about health and were willing to pay more for quality, daily necessities, PwC’s Tsang said.

“That’s why the demand for imported goods is increasing so fast,” she said. ”China’s consumer now are less price-sensitive especially to products they eat or use on their skins.”

Source: South China Morning Post

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