Chinese Online Sellers Face Dual Tax Burdens From EU, Domestic Reforms
- tech360.tv
- 2 minutes ago
- 2 min read
Chinese merchants selling to overseas markets via popular sites such as Shein and Temu face escalating tax and compliance burdens from both the European Union and China's domestic tax authority. These pressures present significant challenges for cross-border e-commerce operations.
The European Union agreed to abolish a rule that allowed goods valued below EUR 150 (USD 174) to enter the region without customs duties. This new rule will apply once an EU customs data hub is ready, scheduled for 2028.
However, the bloc indicated it is working towards a "simple, temporary solution" to levy customs duties on low-value goods as early as the coming year. The European Council stated that 91% of all e-commerce shipments valued under EUR 150 originated from China in 2024.
This influx of small parcels caused issues, leading to "unfair competition" for EU sellers and raising environmental concerns, according to a council statement. Shenzhen-based merchant Liu, who sells household goods on Temu, stated she awaited further details.
Liu noted it was unclear if the new duty would include an extra EUR 2 handling fee previously proposed by the region. She suggested the solution might be similar to how merchants managed when the US removed its "de minimis" duty-free rule on low-value goods.
Liu reported that some sellers like her declared each product’s value as USD 1. This led to tariffs of CNY 3.93 (USD 0.55) for a 126-gram item, raising freight costs by 12%. Liu described this increase as acceptable, as she did not raise prices for US customers.
However, a reform of China’s tax regime is proving to be the biggest challenge for Liu and other cross-border sellers. Starting in October, a change in policy demanded that all online marketplaces, even those not operating on the mainland, report transaction data on Chinese merchants, including sales and refunds, to collect taxes.
This data includes sales and refunds, which are used for tax collection. Consequently, Liu paid an additional CNY 10,000 in taxes in October, encompassing corporate income tax for the third quarter and value-added tax for last month.
Liu stated she could not afford to pay tax in this manner, adding that she was closing her registered entity in mainland China to move the company overseas. Founder and Chief Analyst Li Chengdong of Beijing-based tech consultancy Dolphin, estimated domestic merchants selling overseas would experience a 10% to 15% rise in compliance costs due to China’s reform.
This increase includes expenses for accountants, tax compliance software, and more complex supply chain management. The EU has also intensified its crackdown on Chinese cross-border e-commerce.
Romania has proposed a RON 25 (USD 5.70) fee on small parcels, and Italy is considering a tax on similar packages from non-EU countries. Last week, France began procedures to suspend the Shein website in the country after listings for childlike sex dolls and weapons were discovered.
Authorities relented two days later after these listings were removed.
The European Union is ending its customs duty exemption for goods valued below EUR 150.
China's tax regime now requires online marketplaces to report transaction data for tax collection, increasing compliance costs for merchants.
Merchants face higher operating expenses, with some considering moving their businesses offshore.
Source: SCMP