Russia: cross-border ecommerce customs taxation undergoes modification

They will continue to enjoy tax-free shopping through foreign retailers, as long as their purchases do not exceed a value of EUR 500 per parcel. Above this limit, purchases will be subject to a 30% tax, as previously.

Compared with the current limit of EUR 1,000 and 31 kg per person per month, the new threshold may seem restrictive. However, in reality little should change since average order value is well below EUR 500 in the overwhelming majority of cases, as indicated by a report issued by East-West Digital News released this week.

In 2013 an active lobbying began from domestic retailers, initially supported by the Russian government’s concern about lost tax revenue, tried to put an end to what they considered to be “duty-free e-commerce.” Among the fiercest lobbyists were Enter.ru and KupiVIP.ru, two members of AKIT, an industry association created in 2012. (KupiVIP however, recently launched its own cross-border effort.)

The Russian government has objected that, according to their analysis, cross-border ecommerce is essentially filling gaps in domestic retailers’ assortment and that, consequently, the latters’ complaints about unfair competition are largely unfounded.

Meanwhile, consumer groups called for a boycott of AKIT members and a public protest this past winter, although they failed to mobilize a crowd. A petition against new restrictions on online purchases from abroad was also organized.

The Russian domestic online retail market reached USD 16 billion in 2013, while cross-border sales accounted for approximately USD 3 billion, according to EWDN’s report on cross-border sales to Russia.

In 2014, the market is expected to grow by approximately 75%, with China’s AliExpress asserting its domination on the cross-border scene. Western players are still recording sales growth, even though some of them have experienced a slowdown or even stagnation over the past year, due to increased competition rather than weakening demand.