June 2, 2014, 4:54 PM

Good news for online retailers selling into Russia

It appears the government will not heavily tax e-commerce imports, reports East-West Digital News.

The intense lobbying efforts of domestic Russian retailers against cross-border e-commerce received a serious blow last week when it was confirmed that the expected increase in customs taxes would be extremely mild. The long-awaited decision was announced by Mikhail Yevraev, deputy minister of communications and mass media, at a committee meeting last Thursday, a participant in the meeting told East-West Digital News.

Russian Internet users will continue to enjoy tax-free shopping through foreign retailers, as long as their purchases do not exceed a value of 150 euros or a weight of 10 kilograms per parcel. Above this limit, purchases will be subject to a 30% tax, as previously.

The measure should be made official in about one month, according to EWDN’s source.

Compared with the current limit of 1,000 euros and 31 kilograms per person per month, the new threshold may seem restrictive. However, in reality little should change, since average order value is well below 150 euro in the vast majority of cases, as analyzed in a report by East-West Digital News to be released later this month.

While cheap parcels from Chinese retailers would remain largely unaffected, shipments from Western retailers in the high fashion segment, for instance, could suffer.

Over more than a year, active lobbying from domestic retailers—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.) Meanwhile, consumer associations and a Facebook group called for a boycott of AKIT members and a public protest this past winter—although they failed to mobilize a crowd.

More good news for cross-border trade to Russia is that customs processes and procedures are being simplified, as illustrated by the recent introduction of electronic forms.

It remains to be seen whether the incidents of early January at the customs check points of two Moscow airports—which triggered several international shipment companies to suspend delivery to Russia—will occur again.

The Russian domestic online retail market reached $16 billion last year, while cross-border sales accounted for approximately $3 billion.

This article first appeared in East-West Digital News, the  international online resource on Russian digital industries.

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