China’s major e-commerce enterprises launch various promotion activities from time to time, which really attract consumer’s attention. We briefed the most common promotion schemes and relevant tax provisions as following:
Deduction and coupon
Deduction refers to the seller offers price deduction based on the original price after the sales amount reach a certain amount. Coupon refers to the consumers can deduct the corresponding amount of the coupon when they confirm the order.
Provisions of tax law:
VAT: If the sales amount and the discount show separatetly in the amount column of the same invoice, taxpayers are allowed to pay VAT according to sales amount after the discount; If the discount shows only in the remark colum instead of the amount column, the discount shall not be deducted from the sales amount.
CIT: Taxpayer can pay CIT according to sales amount after the discount.
Installment
Installment is essentially a loan provided by e-commerce enterprises. Consumers can obtain the desired goods after paying a small part of the sales price. However, since this will incur interest in the subsequent payments, the total installment payment is higher than the lump sum payment.
Provisions of tax law:
VAT: When goods are sold by installment collection, the tax payment obligation time is the payment date agreed in the written contract, or the goods delivery date if there is no written contract or no payment date prescribed in the contract. Enterprise also needs to pay VIT when receive interests for the deferred payment.
CIT: Enterprise shall confirm the sales income according to the payment date agreed in the contract.
Pre-sale deposit
Pre-sale refers to the consumers pay deposit that can offset a part of sales price in advance(for example, double deposit can be deducted), and the consumers pay the balance in the sale. Therefore, E-commerce enterprise can predict the sales volume by the deposit status to avoid dull sale or supply shortage.
Provisions of tax law:
VAT: If general goods are sold on the basis of advance payment, the tax payment obligation time shall be the day when the goods are delivered.
CIT: Enterprise shall confirm sales income when the goods are delivered.
Old for new
Old for new means that the consumers trade in older goods in exchange for a certain discount in sales price. The price of new goods is generally lower than the market price or other e-commer enterprises.
Provisions of tax law:
VAT: VAT is generally required to be paid based on the sales price of new goods in the same period, but for gold or silver jewellery, VAT can be paid based on the actual payment amount.
CIT: Enterpise shall confirm sales income according to tax law for sale of goods, the recycled goods shall be treated as purchased goods, and the sales revenue of new goods shall be fully recognised.
Sales return
According to Cosumer Rights Protection Law, online goods can be returned withour reason within seven days of arrival except for special goods. Consumers can return the goods within the agreed return period due to various reasons like poor quality.
Provisions of tax law:
VAT: The corresponding VATof returned goods shall be deducted in the same period, red letter invoice shall be issued as well.
CIT: The sales income shall be reduced accordingly if there is any sales return.
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Disclaimer
All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage.
Deduction refers to the seller offers price deduction based on the original price after the sales amount reach a certain amount. Coupon refers to the consumers can deduct the corresponding amount of the coupon when they confirm the order.Installment is essentially a loan provided by e-commerce enterprises. Consumers can obtain the desired goods after paying a small part of the sales price.
Taxpayers sell merchandise processing repair and maintenance, as well as offering service, intangible assets, and immovable property, which is considered as concurrent operation. Based on the Tax Law regulated in China, taxpayers are involved in various tax rates from concurrent operation, sales amounts should be calculated at various tax rates or confiscatory rates;
Individual industrial commercial defines as individuals or families who are involved in industrial and commercial activities within lawful areas, registered and recorded as law. Individuals attends in industrial and commercial activities should pay individual income tax, Actual and reasonable payment for employees as wages and salaries, allowing for deduction. Employers’ pre-tax deduction for salaries would not be allowed.
‘Income deduction’ refers to a preferential tax measure that allows income from certain business activities to be reduced by a certain proportion. There are 5 preferential situations listed as following: Comprehensive utilization of resources. Financial institutions provide microcredit services for farmers. Insurance enterprise provide services for planting and breeding industry