In recent years, the laws and policies on cross-border e-commerce in major countries in the world have been introduced and improved one after another. At present, the most complete countries and organizations include the United States, the European Union and Japan.
I. Relevant laws and tax policies of the United States
The United States is the first country in the world to develop e-commerce, and it is also the country with the most mature e-commerce development in the world. The United States has formulated a number of laws in cross-border e-commerce, including the Uniform Commercial Code, the Uniform Computer Information Transactions Act and the Electronic Signature Act. Among them, the Uniform Computer Information Transactions Act provides basic legal norms for online computer information transactions in the United States. The Uniform Computer Information Transactions Act is a model law and has no direct legal effect. However, in terms of the application of contract law (such as the application of standard contract law), it integrates the principle of autonomy of will and the principle of closest connection to maximize the protection of the legitimate rights and interests of the counterparty of the electronic contract.
The United States has always adhered to the principles of tax fairness and neutrality in cross-border e-commerce taxation, giving cross-border e-commerce a certain amount of free development space. Since 1996, the United States has implemented the zero tax collection and payment of domestic e-commerce transactions as a medium, and finally collected by the state government. The United States still uses the system of exempting intangible goods from tariffs on online transactions, giving e-commerce more room for development in terms of tax burden.
2. Relevant laws and tax policies of the European Union
The European Commission has issued a new VAT bill for cross-border online transactions, aiming to regulate the VAT payment behavior of online transactions in the EU region and improve the cross-border online transaction service environment.
It is reported that the new bill clearly defines the scope of small e-commerce (annual cross-border trade volume less than 1,000 euros) and small and medium-sized e-commerce (annual cross-border turnover less than 100,000 euros) based on the annual turnover of e-commerce companies, and simplifies the way for cross-border e-commerce to pay VAT. In the future, e-commerce will pay VAT to EU regulators on a quarterly basis according to its own business scale.
The new bill also abolished the “22 euro cross-border trade VAT exemption system”. Previously, if the declared value of a single item sold by cross-border e-commerce in non-EU countries to EU countries was less than 22 euros, it would be exempt from VAT. However, the European Commission determined that the system has contributed to tax evasion and fraud by some merchants, so it was abolished in the new bill.
The EU requires all suppliers of digital goods in non-EU countries to register for VAT in at least one EU country and pay VAT on the services they provide to consumers in EU member states. The VAT is levied based on the place where the goods are produced or the place where the services are provided. For non-EU companies whose e-commerce income comes from EU member states, if they do not have a permanent establishment in the EU, they should register in at least one EU member state, and the tax will be transferred from the country of registration to the country of source. Germany has different taxation standards for incoming parcels and express mail from EU and non-EU countries.
Except for medicines, weapons and ammunition, which are restricted from entering the country, most parcels within the EU are exempt from import tariffs when entering Germany. For cross-border e-commerce products from countries outside the EU, those with a value of less than 22 euros are exempt from import VAT; those with a value of 22 euros or more are subject to 19% import VAT. Goods with a value of less than 150 euros are exempt from customs duties; goods with a value of more than 150 euros are subject to customs duties at the rate specified in the customs tariff catalog.
As the most powerful international organization in the world’s economic field, the EU has always been at the world’s leading level in the development of e-commerce. On the issue of e-commerce taxation, the European Commission issued the “European E-commerce Initiative” in April 1997, arguing that it is more practical to amend the current tax laws and principles than to impose new taxes and surcharges. In July 1997, the European Telecommunications Ministerial Conference attended by more than 20 countries adopted a declaration in support of e-commerce, the “Bern Ministerial Declaration”.
The declaration advocates that the government should minimize unnecessary restrictions and help private enterprises to develop independently to promote Internet business competition and expand Internet business applications. These documents preliminarily clarify the basic policy principles of the EU to create a clear and neutral tax environment for the development of e-commerce.
In 1998, the EU began to impose value-added tax on e-commerce and business tax on suppliers providing online sales and services. In 1999, the European Commission announced the tax guidelines for online transactions: no new taxes and surcharges will be imposed, and efforts will be made to make the current taxes, especially the value-added tax, more adapted to the development of e-commerce.
To this end, the EU has stepped up its reform of the value-added tax. In June 2000, the European Commission passed a bill stipulating that the provision of digital products such as software, music, and videos through the Internet should be regarded as the provision of services rather than the sale of goods, and VAT should be levied on them like the current service industry. In terms of VAT jurisdiction, the EU implements the method of levying VAT at the place of consumption for the provision of digital services, that is, the enterprise as a consumer registers, declares and pays VAT in the country where it is located. VAT is only levied on the supplier when the supplier and the consumer are under the same tax jurisdiction. This can effectively prevent enterprises from setting up institutions in countries that do not levy VAT to evade tax payment, thereby plugging tax collection and management loopholes.
III. Relevant laws and tax policies of Japan
One of the tax policies of Japan to encourage foreign direct investment is to adopt a tax credit method that reflects the principle of capital outflow neutrality. The common point of the tax credit laws of the United States and Japan is that there are provisions on the applicability of indirect credits in domestic laws, such as shareholding ratio and shareholding time requirements. The main differences between the two countries are:
1. Calculation of comprehensive limits. The United States adopts a classified comprehensive limit credit, while Japan adopts a comprehensive limit credit that excludes loss-making countries. The practice is to allow the loss amount of loss-making countries to be excluded when calculating the comprehensive credit limit, which can increase the credit limit and reduce the tax burden of overseas investment enterprises.
2. Tax Sparing Credit. Japan’s domestic tax law has tax sparing clauses to promote the international competitiveness of enterprises. Japan regards the tax reduction and exemption benefits given to developing countries to attract Japanese companies to invest directly in them as taxes paid, and allows them to be deducted from domestic corporate taxes. According to tax treaties and the domestic laws of the contracting countries, the exemption amount for investment income such as interest, dividends and royalties is usually used as a credit object.
The second plan is to set up a reserve for overseas investment losses. Enterprises and governments jointly bear the risks of overseas operations. This has stimulated the interest and motivation of enterprises in foreign direct investment to a certain extent. Japan’s loss reserve system includes the loss reserve system for foreign direct investment implemented in 1960, the loss reserve system for foreign direct investment in resource development in 1971, the loss reserve system for foreign direct investment in specific overseas engineering contracts in 1974, and the loss reserve system for foreign direct investment in large-scale economic cooperation and joint ventures in 1980. The core content is: foreign direct investment that meets certain conditions will include a certain proportion of the investment (such as 7% of the operating and management expenses of specific overseas projects, 25% of the investment in large-scale economic cooperation and joint ventures) into the reserve and enjoy tax exemption treatment.
If the investment is damaged, it can be compensated from the reserve; if it is not lost, the amount will be accumulated for 5 years, and then divided into 5 parts from the 6th year onwards, and merged into taxable income year by year for taxation. On the one hand, the loss reserve system for overseas investment alleviates the impact of losses on the continued operation of enterprises, helping enterprises to get rid of difficulties, get out of losses, and move towards break-even or surplus; on the other hand, it can reduce the tax burden of enterprises as a whole and implicitly increase the level of FDI income.
IV. Tariff thresholds and calculation methods in common countries
The threshold refers to the starting amount for taxation of taxable objects as stipulated by the tax law. If the amount of the taxable object reaches the threshold, the entire amount will be taxed; if it does not reach the threshold, no tax will be levied.
The tariff threshold is the amount limit for the start of tariff collection as stipulated in the Customs Law. The tariff threshold is set in the tariff system to improve work efficiency and avoid complicated tax collection procedures for small taxes. It is also a tariff preference for taxpayers.
The tariff thresholds, VAT and tariff calculation methods in common countries are as follows:
(1) UK threshold: 15 pounds (22 euros), the tariff threshold is 135 pounds, and the comprehensive tariff includes VAT (value added tax), DUTY (tariff) and ADV (customs clearance fees). VAT = [value of goods (declared to the customs) + freight + DUTY], DUTY (tariff) = value of goods x product tax rate.
(2) Australia’s tax threshold: 1,000 Australian dollars. The comprehensive tariff includes DUTY (tariff), GST (goods and services tax) and ADV (customs clearance fees). GST = VAT [value of goods (declared to the customs) + freight + DUTY] x 10%, DUTY = value of goods x product tax rate.
(3) US’s tax threshold: 200 US dollars. The comprehensive tariff includes DUTY (tariff) and ADV (customs clearance fees). DUTY = value of goods x product tax rate.
(4) EU’s tax threshold: 22 euros. The comprehensive tariff composition: VAT = [value of goods (declared to the customs) + freight + DUTY] x 19%, DUTY = (value of goods + freight 70%) x product tax rate.
(5) Canada’s tax threshold: 20 Canadian dollars. The comprehensive tariff includes VAT (value added tax), DUTY (tariff) and ADV (customs clearance fees). VAT = [value of goods (declared to the customs) + freight + DUTY], DUTY = value of goods x product tax rate.
(6) Japan’s tax threshold: 130 US dollars. The comprehensive tariff includes VAT (value added tax), DUTY (tariff) and ADV (customs clearance fees). VAT = [value of goods (declared to the customs) + freight + DUTY], DUTY = value of goods x product tax rate.