STA Interpretation: Deemed Assessment of EIT for Cross-border E-commerce Retail Export Enterprises in Comprehensive Pilot Zones

关于《国家税务总局关于跨境电子商务综合试验区零售出口企业所得税核定征收有关问题的公告》的解读

Source (Chinese): STA Policy Database — 政策解读 (STA General Office, October 26, 2019)

English translation: Independent translation. Not an official government translation.

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Recently, the State Taxation Administration issued the Announcement on Issues Relating to the Deemed Assessment of Enterprise Income Tax for Cross-border E-commerce Retail Export Enterprises in Comprehensive Pilot Zones (hereinafter the "Announcement"). The following interpretation is provided:

I. Background

In September 2018, the Ministry of Finance, the State Taxation Administration, the Ministry of Commerce, and the General Administration of Customs jointly issued the Notice on Tax Policies for Retail Export of Goods from Cross-border E-commerce Comprehensive Pilot Zones (Cai Shui [2018] No. 103). For cross-border e-commerce retail export enterprises (hereinafter "cross-border e-commerce enterprises") within Cross-border E-commerce Comprehensive Pilot Zones (hereinafter "Comprehensive Pilot Zones") that have goods for which valid purchase invoices cannot be obtained, those meeting the prescribed conditions are exempt from VAT and consumption tax on exports (hereinafter the "invoice-free tax exemption" policy). To support the development of the cross-border e-commerce industry and promote innovation in foreign trade models, and to complement the implementation of the "invoice-free tax exemption" policy, the State Council executive meeting decided to introduce a more business-friendly deemed assessment method for EIT. Accordingly, the STA issued the Announcement to further clarify issues relating to the deemed assessment of EIT for cross-border e-commerce enterprises, facilitating these enterprises in better conducting their export business.

II. Main Contents

The Announcement covers the scope, conditions, method, procedures, and preferential policies for the deemed assessment of EIT for cross-border e-commerce enterprises within Comprehensive Pilot Zones, aiming to provide more convenient operational procedures for these enterprises.

(1) Scope of Deemed Assessment

To complement the implementation of the "invoice-free tax exemption" policy, the cross-border e-commerce enterprises covered are those meeting the conditions specified in Cai Shui [2018] No. 103 — namely, enterprises that conduct e-commerce exports through self-built cross-border e-commerce sales platforms or through third-party cross-border e-commerce platforms.

(2) Conditions for Deemed Assessment

Cross-border e-commerce enterprises that export goods through e-commerce platforms are a new business model that has developed in recent years. To encourage the development of cross-border e-commerce, in light of the practical situation where cross-border e-commerce enterprises cannot obtain purchase invoices for their exported goods, the Ministry of Finance, the Ministry of Commerce, the General Administration of Customs, and the State Taxation Administration jointly issued Cai Shui [2018] No. 103. Cross-border e-commerce enterprises meeting the prescribed conditions may apply the pilot "invoice-free tax exemption" policy. For these enterprises, where they meet the conditions prescribed in this Announcement, EIT may be assessed on a deemed basis as a pilot measure.

(3) Method of Deemed Assessment

Since cross-border e-commerce enterprises can accurately account for their revenue, to simplify operations for both taxpayers and tax authorities, cross-border e-commerce enterprises within the Comprehensive Pilot Zones that are subject to deemed assessment shall uniformly adopt the deemed taxable income rate method for EIT assessment. At the same time, considering that cross-border e-commerce enterprises primarily conduct procurement and sales of export goods through e-commerce platforms, with relatively minor differences across regions, and to further reduce the burden on enterprises and promote the development of export business, the deemed taxable income rate for cross-border e-commerce enterprises subject to deemed assessment in the Comprehensive Pilot Zones shall be determined according to the minimum deemed taxable income rate for wholesale and retail trade as specified in the Notice of the State Taxation Administration on Printing and Distributing the Measures for the Deemed Assessment of Enterprise Income Tax (Trial) (Guo Shui Fa [2008] No. 30, as amended by STA Announcement No. 31 of 2018) — that is, a uniform rate of 4%.

(4) Procedures for Deemed Assessment

Cross-border e-commerce enterprises within the Comprehensive Pilot Zones and tax authorities shall process deemed assessment-related matters in accordance with the relevant provisions. Tax authorities shall promptly complete the deemed assessment determination for cross-border e-commerce enterprises within the Comprehensive Pilot Zones, and the enterprises shall file tax returns on time.

(5) Preferential Policies

Cross-border e-commerce enterprises within the Comprehensive Pilot Zones subject to deemed assessment may primarily enjoy the following two categories of preferential policies:

1. Those meeting the conditions for small and low-profit enterprise (小型微利企业) preferential policies as specified in the Notice of the Ministry of Finance and the State Taxation Administration on Implementing Inclusive Tax Reduction Policies for Small and Micro Enterprises (Cai Shui [2019] No. 13) may enjoy the EIT preferential policies for small and low-profit enterprises. Where the above provisions are subsequently amended, the amended provisions shall apply.

2. Where income received falls within the scope of tax-exempt income under Article 26 of the Enterprise Income Tax Law of the People's Republic of China, the relevant tax-exempt income preferential policies may be enjoyed.

III. Effective Date

The Announcement takes effect from January 1, 2020.