China lifts tax-free ceiling for personal online purchases from abroad

China’s Ministry of Finance announced Friday that it will lift the tax-free ceiling for personal cross-border e-commerce retail purchases to RMB 5,000 (around $720) from RMB 2,000, for certain goods.

A person’s annual tax-free total purchases shall not surpass RMB 26,000, a 30% increase compared to the current RMB 20,000 threshold, the ministry said.

The new regulation will be implemented on January 1, 2019, the same day as the new Electronic Commerce Law. The increase is meant to reflect wider shifts in consumption patterns, where Chinese consumers are increasingly willing to purchase more high quality goods, the ministry added.

The announcement is expected to have little influence on existing large international e-commerce players, because they have been closely following government regulations, and require consumers to pay tax on purchases.

The same can’t be said for daigou, or personal shoppers, and the ministry’s announcement could significantly jeopardize their business. The term usually describes Chinese people who travel or live overseas, and earn money by bringing back quality foreign products and selling them to people in China.

The increased tax-free allowances mean the incentive for ordinary Chinese people to save money by using the services of a daigou could decline.

In July, a Taobao daigou was sentenced to 10 years in prison and fined RMB 5.5 million for smuggling and tax evasion.

Currently more than 1,300 products are covered under import tax rules. The new announcement adds 63 new ones including wine, beer, and fitness equipment—goods that Chinese people increasingly are interested in buying.

The announcement also states the products purchased from e-commerce platforms are considered as personal belongings, and should not be resold in the Chinese market.