The 13th NPC Standing Committee (NPCSC) concluded its fifth session last Friday and adopted the E-Commerce Law, the Soil Pollution Prevention and Control Law, and an amendment to the Individual Income Tax Law. All three laws will take effect on January 1, 2019. Due to competing offline commitments, we are able to discuss only two laws in relative detail below.
The E-Commerce Law [电子商务法] includes seven chapters with a total of 89 articles. “E-commerce” as defined and regulated by the Law refers to domestic “business activities that sell merchandise or provide services on information networks such as the internet” (art. 2, para. 2). Expressly excluded from the purview of the Law are “financial products and services, as well as services that use information networks to provide such content as news information, audio-visual programs, publications, and cultural products” (id. para. 3). “E-commerce operators” [电子商务经营者], or individuals and organizations that engage in e-commerce, encompass “e-commerce platform operators” (like Taobao), “intra-platform operators” (like vendors on Taobao), and other e-commerce operators (for example, people who do business on WeChat) (art. 9).
The Law gives special attention to the duties and obligations of e-commerce operators. They are generally required to register with market regulatory authorities, except those exempted by statute or regulations and (among others) those who engage in “small sporadic transactions” [零星小额交易] (art. 10). They must also comply with various disclosure requirements on, for example, their licenses and merchandise- or services-related information (see arts. 15–17). In addition, among other prohibitions, e-commerce operators must not fabricate reviews to deceive or mislead consumers (art. 17); must not show consumers targeted ads without also showing them non-targeted ads (art. 18); and must not make tied [搭售] merchandise or services selected by default (art. 19).
Given the dominant role e-commerce platform operators play in e-commerce in China, the Law devotes an entire section to their specific duties and obligations (see Ch. 2, sec. 2). They are required to assist with real-name registrations of intra-platform operators (see art. 28), to ensure cybersecurity (see art. 30), to guard the safety of the person and property of consumers (see art. 38), and to protect intellectual property (see arts. 41–45), among others responsibilities. In particular, platform operators are subject to joint and several liability for certain torts committed by intra-platform operators, such as consumer rights or intellectual property infringement, if they “know or should have known of” the infringement but have failed to take necessary actions (see arts. 38, 42, 45). The failure to act additionally exposes platform operators to hefty fines of up to two million yuan (see arts. 83–84).
The Law supplements existing laws like the Contracts Law [合同法] and the Electronic Signatures Law [电子签名法] with special rules for the conclusion and fulfillment of e-commerce contracts (see Ch. 3). It also includes two other chapters on e-commerce dispute resolution and e-commerce promotion, respectively (see Chs. 4–5). An English translation of the Law is available at China Law Translate.
The Soil Pollution Prevention and Control Law [土壤污染防治法] includes 99 articles in seven chapters, including ones titled “Planning, Standards, General Survey, and Monitoring” (Ch. 2), “Prevention and Protection” (Ch. 3), “Risk Control and Restoration” (Ch. 4), and “Safeguard and Oversight” (Ch. 6). The Law is being translated at China Law Translate.
Lastly, the amendment to the Individual Income Tax Law [个人所得税法] makes changes to 12 of the Law’s 15 articles and adds seven new ones. The amendment does not significantly differ from the draft released in late June, which had resulted in quite contentious debates in the NPCSC. The lack of meaningful changes might also explain why the amendment passed with an unusually high number of abstentions (11) and dissenting votes (2). (For comparison, the E-Commerce Law passed with only three abstentions and one no vote, while the Soil Pollution Prevention and Control Law passed unanimously.) Because we have previously summarized the draft, we discuss here only the few notable revisions made.
First, the draft was revised to allow taxpayers to pay taxes on only 80% of their income from labor service payments, author’s remunerations, and royalties. Income from author’s remunerations is furthered discounted by 30% when calculating taxable income. In other words, authors need only pay taxes on 56% of their remunerations. Second, taxpayers will be able to claim “special expense deductions” [专项附加扣除] for care for the elderly, in addition to “children’s education, continuing education, treatment for serious diseases, and housing loan interest or housing rent” under the draft. Third and lastly, older provisions granting the State Council’s finance and tax authorities to prescribe rules that would affect tax liabilities were revised to delegate the authority to the State Council itself. And those rules must be filed with the NPCSC for recording.
To the dismay of many, the new minimum threshold of 5,000 yuan per month was not further raised, nor was the highest tax rate of 45% reduced. But the Constitution and Law Committee in a report signals that the Law might be amended again in the near future, for this amendment is only the “key first step” in reforming the individual income tax.
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The NPCSC also reviewed the following draft laws during its session last month. We expect all to be released for public comments this week.
- Amendment to the Criminal Procedure Law (刑事诉讼法);
- Separate Parts of the Civil Code (民法典各分编);
- Vehicle Acquisition Tax Law (车辆购置税法);
- Farmland Occupancy Tax Law (耕地占用税法);
- Regulations on Fire and Rescue Ranks of Integrated Fire and Rescue Teams (综合性消防救援队伍消防救援衔条例).
The NPCSC will convene for its next regular session in late October.