As it was before
In 1993, the first Customs Code of the Russian Federation was adopted, according to which Prime Minister Viktor Chernomyrdin signed a decree "On the procedure for moving by individuals across the customs border of the Russian Federation goods not intended for production or other commercial activities." According to him, the Russians could receive from abroad any goods with a total value of up to $ 200 (at an average annual rate of 2203 rubles per $ 1), and in case of exceeding the limit, they were required to pay 60% of the total cost of the parcel.
On August 1, 1996, the threshold for duty-free imports dropped to $ 100 (at an average annual rate of 5124 rubles per $ 1), and the size of the duty itself dropped to 30-50%. From 2003 to 2010, individuals could place an order without overpayment in the amount of up to 10 thousand rubles. per week, and from mid-2010 to the end of 2018 - up to € 1,000 per month. For exceeding the limit, you had to pay 30% of the total cost of the parcel, and for overweight over 31 kg - $ 4 for each additional kg.
In 2018, the Customs Code of the Eurasian Economic Union entered into force, regulating the movement of goods across the customs border of Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia. Since January 1, 2019, by the decision of the Council of the Eurasian Economic Commission, the threshold for duty-free import of goods from abroad has decreased from € 1,000 to € 500 per month. This situation was in effect for only a year: from January 1, 2020, Russians are required to pay a 15% tax on all orders more expensive than € 200, and for exceeding the norm of 31 kg - € 2 for each additional kg.
Why is it needed
Andrey Belyaninov, the head of the Federal Customs Service, was one of the first to take the initiative to reduce the duty-free threshold from € 1,000 to several hundred euros in 2013. It was supported by the Association of Internet Trade Companies (AKIT), which unites and protects the interests of such Russian retailers as Wildberries, Lamoda, StreetBeet, Sportmaster and Ozon. The then president of the association, Sergei Rumyantsev, said that the regulation would help ensure “a level playing field for market participants,” because trading platforms inside the country pay VAT, which means they cannot sell their goods cheaper than foreign online stores and therefore lose customers.
In addition, Sergei Rumyantsev noted that changes in the legislation will contribute to the eradication of "illegal entrepreneurship" in Russia. “This is when up to 40% of cross-border trade is conducted by companies under the guise of private individuals and is then resold on the Internet, in markets, even in stores,” explained the president of AKIT. "Naturally, [these measures] will not be able to deal with illegal immigrants, but at least most of what is imported will be monitored and the situation will be more controlled." Then, as well as for several years, the initiative did not find support from the government, in particular due to difficulties in collecting the duty. It had to be paid through the offices of the Federal Customs Service, which caused inconvenience to citizens.
Aizel Trudel, the co-founder of the Russian online store Aizel.ru, contributed to the amendments to the law. She spoke about this during the discussion "Reform of the Russian fashion industry: economic potential in the domestic and foreign markets", which was held as part of the St. Petersburg International Economic Forum in June 2019. “For four years I have been trying to lobby for a change in the law to reduce the export threshold for duty-free import to Russia. I was with all the leaders who used to do this. Only thanks to [Minister of Finance] Siluanov and [Minister of Industry and Trade] Manturov did this happen. They have lowered the duty-free import: from January 1 of this year it became 500 [euros] from 1 thousand [euros], and from next year it will be 200 [euros]. Maybe within a large country this is not a big change,but for retailers it's a breath of air."
At the public talk “Is there fashion in Russia?” Held at Mercedes-Benz Fashion Week Russia in October, Aysel Trudel, who, by her own admission, faced public reproaches after the discussion at SPIEF, explained the importance of the amendments: “[…] I believe that if you and I live in Russia, we must strive to ensure that the economy of this Russia develops. I believe that we must do so that our business makes money. I do not want my business and the business of my colleagues in the market - magazines, publications, publishing houses - to be closed just because foreign online stores can sell to Russia and, while violating the law, lowering invoice prices and bypassing the border, take away money from this country. Don't you want Russia to develop? Don't you want this country's economy to get stronger? I want to. Because I live here, I work here, and I think I'm going to die here. And how should we survive? How will we pay for advertising, and the journalists who often reproach me, how will they receive their salaries? […] Many [Russian] representative offices of foreign companies, be it Prada or Gucci, faced the same problems that we faced. Prices in Russian stores and in stores of foreign representative offices were different. Because when, bypassing the border, the goods passed through Russia, they did not pay taxes. I believe that we did the right thing, that this law was adopted. "how will they receive their salaries? […] Many [Russian] representative offices of foreign companies, be it Prada or Gucci, faced the same problems that we faced. Prices in Russian stores and in stores of foreign representative offices were different. Because when, bypassing the border, the goods passed through Russia, they did not pay taxes. I believe that we did the right thing, that this law was adopted. "how will they receive their salaries? […] Many [Russian] representative offices of foreign companies, be it Prada or Gucci, faced the same problems that we faced. Prices in Russian stores and in stores of foreign representative offices were different. Because when, bypassing the border, the goods passed through Russia, they did not pay taxes. I believe that we did the right thing, that this law was adopted."
Don't you want this country's economy to get stronger? I want to.
Aysel Trudel's words were previously confirmed by the current president of the Association of Internet Trade Companies Artem Sokolov. In an interview with RBC TV channel during the Russian Retail Week, he said: “AKIT has always advocated and will continue to advocate equal conditions for competition in our market. Competition in global markets has become so intense that we are now fighting the largest international giants for our clients. Everyone knows their names, these sites are known all over the world. They operate in a huge number of markets. They ship to a huge number of countries. And as soon as the client is online, he has access to all the world players, among which there are Russian sites, where Russian manufacturers are located. Here it is very important to choose whom we support. If we want to develop our own retail, then we, of course,it is necessary to recognize e-commerce as a form of foreign economic activity and apply all those measures that apply to foreign economic activity. Keep records, monitor the safety of these goods, apply certain tariff measures. We don't care what the tariffs are. This state must determine."
How reducing the threshold to € 500 affected online shopping
Even before the adoption of the law to reduce the duty-free threshold to € 500, representatives of the Ministry of Finance explained that the changes would not affect the market in any way. This was confirmed by Russian experts: for example, Andrei Milekhin, president of the Romir research center, which conducts economic, social and political expertise in 55 countries of the world, noted that the average order amount of Russians in online stores is 9146 rubles. or € 117. Among the respondents, 39% said that most often they order things for the amount of € 10-50, 16% of buyers spend € 50-100, and 9% transfer € 100-200 abroad. According to polls, only 5% of respondents reach the € 500 limit.
The largest foreign online retailers that specialize in the sale of premium brand products also claimed that the average cost of their customers' purchases was within the € 500 limit set in 2019, or only slightly above it. Farfetch has $ 584.6 (as of Q3 2018), YOOX has $ 386 (as of September 2018).
The changes in tax policy did not really have negative consequences for the majority of Russian citizens. Moreover, a month after the decrease in the duty-free threshold, in February 2019, experts recorded an increase in the number of purchases in foreign stores by 20-25% compared to the same period in 2018. In August 2019, analysts noted an increase in the number of foreign Internet parcels from which taxes were paid by almost 80%. Only the purchasing behavior of Russians has changed: “People began to split their orders more often and buy more at the beginning of the month, when the threshold of duty-free shopping has not yet been exhausted,” Alexander Perepelkin, former Farfetch brand director, explained to RBC.
Russian sellers of premium goods have also benefited from the tightening of duty-free import regulations. So, the representative of TSUM Anna Dubrovina, in a conversation with RBC, noted an increased interest in the company's online store in early 2019. “This is due to an increase in the number of new customers who refuse orders on foreign online platforms due to worsening conditions: higher prices for goods due to duties, a longer waiting time for goods and additional inconveniences - the need to pay duties on their own,” Dubrovina explained. Taking into account the sale of autumn-winter collections, which started in January 2019, TSUM received four to five times more orders than the average for the year.
Russian marketplaces operating in the middle price segment also remained in the black. The Wildberries online store, which operates on the territory of the Eurasian Economic Union (Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan) and offers Mango, Oodji, Reserved and Geox clothes, became the most popular in the world in 2019. According to the calculations of the marketing analytics company SEMrush, Wildberries overtook H&M, Macy's, Zara, Asos and other major retailers: the average monthly traffic of the site was 78.4 million people.
What will happen after lowering the threshold to € 200
According to Romir, lowering the duty-free threshold to € 200 will have little impact on the purchasing behavior of most Russians. But the limits of € 100, € 50 and € 20, which the Ministry of Finance is considering introducing in July 2020, as well as in 2021 and 2022, respectively, can significantly change the domestic market. The Finance Ministry's initiative has already been supported by Prime Minister Dmitry Medvedev, who instructed to work out the issue for consideration at the council of the heads of government of the Eurasian Economic Union. The arguments for lowering the threshold are the same as in 2017: cross-border trade is actively growing in Russia, but foreign online stores do not pay VAT and import customs duties, as a result of which “there is a flow of profits and taxes from Russian retail” to foreign online stores …
The limits of € 100, € 50 and € 20, which the Ministry of Finance is considering introducing in July 2020, as well as in 2021 and 2022, respectively, can significantly change the domestic market.
How to pay the threshold crossing fee
If earlier taxes on purchases in foreign online stores had to be paid through the branches of the Federal Customs Service, now the procedure is becoming much easier and faster. The instructions for paying the fee are written on the websites of most companies, for example, on Farfetch. “You can pay the tax by following the link that you will receive via SMS from DHL along with your invoice number. All you have to do is pay your tax online. You do not have to communicate with representatives of the customs service, since the tax amount is calculated automatically,”- indicated in the delivery information. For customs clearance, a passport and TIN will be required.
If the online store delivers not by DHL, but by Russian Post, the customs duty for a parcel more expensive than € 200 can be paid upon receipt. To do this, even at the border, the employee writes out a customs receipt order (TPO), and on the parcel puts a mark "Release is allowed with mandatory payment of customs duties and taxes." In some cases, data on TVET are entered into the system, which allows them to be paid in advance online - for example, through the IPPAY service.
How to buy premium brand items today
The founder of the Arctic Explorer brand, Ksenia Chilingarova, explains: despite the fact that with the decrease in the threshold for duty-free import, purchases at foreign online retailers like Farfetch have not become less convenient (“everything is pretty simple in principle, only you pay tax. I don't want to for them. According to her, the very meaning of orders in online stores abroad, which "because of different logistics can keep prices lower" than in Russia, is lost. “In the case of tax, you do not save at all, so many, it seems to me, refuse this type of shopping, but simply buy abroad and deliver here through friends. I have a friend who already has a whole warehouse at home [with orders from friends from Russia],”Chilingarova says.
Stylist Anastasia Nozhina, a client of the brands Chanel, Jil Sander and Balenciaga, also emphasizes that it becomes much more profitable to deliver the desired items to Russia on their own. “Most of the time I shop at Farfetch and Matches Fashion, but online shopping has been closed for me since January 1st. I don’t want to overpay, I don’t see any point in doing it. Better to get tickets to Paris and go to local boutiques. Or order clothes through buyers. " The decrease in the limit on purchases from abroad did not induce her to go over to the side of Russian companies: “I ordered almost nothing from domestic Internet retailers. In my opinion, only once on Aizel.ru. It seems to me that our assortment is too limited, the price is too high. There are not many things that can be bought in foreign stores."
The authors of the Antiglianets Telegram channel, who run the section "One thing - four prices" and offer subscribers to guess which of the online stores (foreign Farfetch, LuisaViaRoma and Net-a-Porter or Russian Aizel.ru and Tsum.ru) a certain thing is cheaper, also commented on its attitude to innovations: “From those sites that appear in the heading, you can understand where we buy. We will travel more often from January 1. And to support individual domestic producers, apparently. By the way, we noticed that our retailers have started to adjust prices, and not just email us after each vote, so we hope for general adequacy."
“I am not sure that the changes will greatly affect the development of the domestic industry. In order for Russians to buy local brands, and they receive good funding and invest it in marketing, PR and production, you need to talk about them as much as possible,”concludes Ksenia Chilingarova. - But bans and restrictions have never done anything good to anyone, because according to all economic laws, competition only strengthens the business and helps it develop. In general, there is a feeling that lowering the duty-free threshold is another border that has grown between us and the rest of the world.”>