- China E-commerce business as a foreigner has surged, making China one of the largest e-commerce markets globally, with online retailers earning billions annually. The appeal for international investors is clear, as foreign businesses can sell directly to Chinese consumers and explore the market.
- However, the rise in e-commerce has led to increased consumer complaints and unfair competition allegations, prompting new government regulations. To succeed, businesses must understand these rules and register company in China to stay compliant. Here, we outline strategies for effective market entry and the essential regulations to follow.
Legal requirements for China e-commerce business
ICP license:
- Businesses in China need an Internet Content Provider (ICP) license to operate online. Issued by the Ministry of Industry and Information Technology, this license is essential for hosting and accessing a China Content Delivery Network.
- Obtaining an ICP license may be challenging, especially for foreign applicants. The type of website influences the approval process.
- Chinese citizens and companies typically find it easier to get approval as compared to international applicants.
- While some businesses might operate without an ICP license, the risk of irreversible government blocking remains.
There are two types of ICP license:
ICP BeiAn or ICP Filing (非经营性ICP/ICP备案):
- This permit is suitable for hosting websites in China, primarily for non-commercial and non-transactional purposes.
- Any business or individual can apply for an ICP Filing.
ICP Commercial License (经营性ICP):
- This permit allows businesses to legally accept online payments. It is typically required for online stores selling services or physical goods, intended for commercial and transactional purposes.
- This license can only be obtained after you have acquired the ICP Filing license.
- Only company with at least 51% mainland chinese ownership can apply and obtain ICP commercial license.
Alternative for Foreign-owned E-commerce Businesses:
- Due to the restriction, many foreign-owned e-commerce businesses in China choose to operate through third-party online e-commerce platforms such as Tmall Global, Kaola, TaoBao, JD.com or Alibaba, utilizing their platform’s ICP commercial license to operate and sell their products. However, depending on the type of platform, there are various setup fees, annual maintenance fees and commission that you need to take note of.
Taxes when making purchases:
- Recently, new Chinese laws capped tax-free cross-border purchases at RMB5,000 per transaction and RMB26,000 annually.
- This allows easier access for e-commerce companies to import high-end fashion and cosmetics for cross-border consumers without subjecting to import tariffs while enjoying a 30% VAT reduction.
New regulatory protections:
- China has introduced new regulations for payment methods, customs clearance, and goods inspection.
- There are various platforms that must comply with these regulations, which aim to boost cross-border e-commerce.
- The government is addressing unfair competition and consumer complaints, banning fake reviews, and requiring platforms to ensure product authenticity.
Intellectual Property protections:
- E-commerce platforms must protect intellectual property rights, responding quickly to infringement reports to avoid penalties.
- Registering trademarks with the Chinese government is crucial, as foreign registrations do not automatically protect in China.
- Unregistered trademarks can be claimed by others, forcing companies to pay for their use.
Conclusion
- The China e-commerce market offers vast opportunities for businesses, but navigating its complexities requires expert guidance. Tetra Consultants provides comprehensive support, including offshore company incorporation, legal drafting services, and more, to ensure your business thrives.
- Our team of specialists will help you understand regulatory requirements, secure necessary licenses, and implement effective strategies for success. Partner with Tetra Consultants to confidently enter and excel in the dynamic China e-commerce landscape.
- Contact us to know more about China e-commerce business and our team will revert back in 24 hours.
