Now! China Feb 2026 - Smarter Budgeting for Retail Businesses

How CFO Support Services Simplify Financial Planning

Since 2022, China’s retail sector has shown steady recovery and structural upgrading. Total retail sales of consumer goods increased from RMB 43.97 trillion in 2022 to RMB 50.12 trillion in 2025, positioning China among the world’s largest retail markets and reinforcing its role as a key driver of global consumption growth.

Meanwhile, fueled by continued business model innovation, China’s online retail sales reached RMB 15.97 trillion in 2025, representing an 8.6% year-on-year increase. The deep integration of online and offline channels has strengthened the omni-channel consumption ecosystem, with the proportion of physical goods sold online remaining stable at around 26%–27% in recent years.

According to Tmall Global data, in the first half of 2025 alone, more than 2,000 overseas retail companies launched their first stores in China through cross-border e-commerce platforms. In 2025, cross-border e-commerce sales grew by 30% year on year. By leveraging mature digital channels and localised strategies, overseas retail brands can quickly enter high-potential segments and achieve rapid business growth.

As the domestic market continues to expand and brand footprints grow, operating capital requirements, revenue and cost structures and cost pressures are evolving dynamically. To better manage the company’s operations, allocate resources effectively, and sustain growth, enterprises must establish a robust and forward-looking budgeting and forecasting system.

Common Challenges in Retail Budgeting

In practice, enterprises often face the following challenges:

Difficulty in sales forecasting and data volatility

• Sales are heavily influenced by seasonality, promotions, trading area dynamics, competitors, and the mix between online and offline channels. Historical data often provides limited reference value, leading to significant variances between budgets and actual performance.

Inventory and supply chain capital lock-up

• Stock preparation, replenishment cycles, slow-moving inventory, and returns directly affect cash flow. Budgeting often struggles to align with inventory turnover and procurement rhythms.
  

Fragmented channels and store networks

• With a mix of direct-operated stores, franchises, e-commerce platforms and delivery channels, breaking down budgets by store, product category, or region becomes increasingly complex, limiting refined management control.
  

Rising fixed costs

• Rent, labor, and logistics expenses account for a substantial portion of total costs. Inflationary pressures and wage growth further complicate cost forecasting.

Cash flow timing gaps

• Differences in payment collection cycles may create temporary liquidity pressure and cash flow gaps.
  

Limited digital integration

• Disparate systems across POS, ERP, inventory, and financial systems often result in manual consolidation, inefficiencies, higher error risks and delayed insights. 
  

How SBA Stone Forest Supports Retail Enterprises

In response to these challenges, SBA Stone Forest provides tailored CFO support services, including:

Accounting and Advisory

• Conduct in-depth reviews of business models and operational processes to identify key control points and risk areas.

• Optimise Standard Operating Procedures (SOPs) to enhance compliance, efficiency, and practicality.

• Develop comprehensive budgeting and forecasting models aligned with strategic objectives, supported by historical and forward-looking data analysis.

Budgeting System Implementation

A structured budgeting system serves as a core digital management tool to support strategy execution and risk management.

• Establish a closed-loop process covering budget preparation, execution monitoring, variance analysis, early warning mechanisms and performance evaluation.

• Translate strategic objectives into quantifiable, traceable performance indicators through multi-dimensional budgeting approaches.

• Enable real-time monitoring of budget versus actual performance and variance analysis.

• Integrate financial and operational systems to enhance resource allocation and decision-making.

With over ten years of experience in the retail industry, SBA Stone Forest has supported numerous retail enterprises across e-commerce, new retail and social commerce sectors. Our professional finance team provides end-to-end services, from system design and process optimisation to data integration, budgeting and ongoing forecasting support.

China Updates

Accounting and Taxation

Preferential Tax Policies for Returned Cross-Border E-Commerce Goods

Issued by the Ministry of Finance, the General Administration of Customs, and the State Taxation Administration

From January 1, 2026 to December 31, 2027, goods exported under customs supervision codes for cross-border e-commerce (1210, 9610, 9710, 9810) and returned to China in their original condition within 6 months due to slow sales or customer returns (excluding food) shall be exempt from import duties, import value-added tax and consumption tax. 

Export duties already levied at the time of export shall be refunded. Value-added tax and consumption tax previously paid shall be handled in accordance with the relevant tax provisions for return of domestic sales goods.

Where goods are exported under supervision code 1210, they shall be returned to a location outside the custom’s special supervision zone or bonded logistics center (Type B) within 6 months from the date of departure from the zone.

For goods eligible under Article 1, where an export tax refund has already been processed, the enterprise shall repay the refunded taxes in accordance with current provisions. Upon repayment, the enterprise may apply for exemption from import duties, import-stage value-added tax and consumption tax, as well as a refund of export duties, by presenting the Certificate of Tax Repaid/No Tax Refund for Export Goods issued by the competent tax authority.

The term “returned to China in original condition” as mentioned in Article 1 means that the smallest saleable unit of the goods returned to China is substantially consistent with its condition at the time of original export, without any additional parts or components, and without any processing or modification.

Unpacking, inspection (including chemical inspection), installation and commissioning shall still be regarded as meeting the “original condition” requirement. The returned goods shall be unused, except in cases where quality defects can only be identified after trial use or where it can be proved that the goods were returned following customer trial use.

For goods eligible under Articles 1, 2 and 3, the enterprise shall submit supporting materials such as the export declaration list or export declaration form, together with an explanation of the reason for return, to prove that the goods are returned to China due to slow sales or customer returns. The enterprise shall be legally liable for the authenticity of the submitted materials.

For goods returned due to slow sales, the enterprise shall provide a self-declaration confirming that the return is caused by slow sales and complete the relevant formalities for tax exemption on returned goods. 

For goods returned due to customer returns, the enterprise shall provide return records (including return or rejection records from cross-border e-commerce platforms), return agreements and other supporting documents as evidence of the reason for return. Customs will process the tax exemption formalities accordingly.

Enterprises that engage in illegal acts such as tax evasion or tax fraud shall be dealt with in accordance with relevant national laws and regulations.

Announcement on Matters Concerning Input Value-added Tax Deduction and Other Related Issues

The Ministry of Finance (“MOF”) and the State Taxation Administration (“STA”) jointly issued the Announcement on Matters Concerning Input Value-added Tax (“VAT”) Deduction and Other Related Issues on January 30th, 2026. The announcement aims to clarify the specific operational details following the implementation of the VAT Law and its implementing regulations.

The key points of the announcement are as follows:

Input VAT deduction (General taxpayers)

The provisions below apply to general taxpayers.

1. Purchase of motor vehicles: The deductible input VAT amount is based on the VAT amount specified on the unified motor vehicle sales invoice.

2. Purchase of domestic passenger transportation services:
   
   • The deductible input VAT amount is based on the VAT amount specified on special VAT invoices or electronic invoices (railway e-tickets or air transportation e-ticket itineraries)
   • For road or waterway tickets with passenger identification information, the deductible input VAT amount shall be calculated using the formula: Deductible VAT =Face amount ÷ (1＋3%) × 3%
3. Purchase of road, bridge and toll passage services:
   • The deductible input VAT amount is based on the VAT amount specified on special VAT invoices or VAT electronic ordinary invoices (for expressway tolls or invoices marked "通行费 (Toll)").
   • For bridge or gates toll invoices, the deductible input VAT amount shall be calculated as: Deductible VAT = Face amount ÷ (1＋5%) × 5%
4. Non-deductible projects: Where goods (excluding fixed assets) or services are used for simplified taxation or VAT-exempt projects and cannot be separately classified, the non-deductible portion shall be calculated based on the proportion of sales revenue.
5. Voucher requirements: To claim input tax deductions based on tax receipts, the company must provide supporting documents such as contracts, payment receipts, and relevant documentation from overseas entities. Otherwise, the deduction will not be permitted.

Assets reorganisation

1. An asset reorganisation meeting all of the following conditions shall not be subject to VAT and the related input VAT may continue to be deducted:

   • The transferred assets constitute an independently operating business unit.
   • The assets are transferred together with the associated debts, liabilities and employees.
   • The reorganisation has legitimate business purposes and is not primarily intended for tax evasion.
   • Both the transferring and receiving parties are general taxpayers.
2. Where the reorganisation results in the deregistration of the taxpayer, any remaining input VAT credits may be inherited by the newly merged taxpayer.

Taxable transactions involving multiple tax rates

General taxpayers shall apply the tax rate corresponding to the principal nature of the taxable transaction. Similar transactions shall be treated as follows:

This announcement is effective from January 1st, 2026.  

Announcement on Matters Concerning the Pre-Tax Deduction of Advertising and Promotion Expenses

The Ministry of Finance (“MOF”) and the State Taxation Administration (“STA”) jointly issued the  Announcement on Matters Concerning the Pre-Tax Deduction of Advertising and Promotion Expenses (“A&P expenses”) on December 29th, 2025.  

The announcement extends and clarifies the corporate income tax (“CIT”) policy regarding the pre-tax deduction of A&P expenses for the period from January 1, 2026, to December 31, 2027. This announcement supersedes the previous Announcement No. 43 of 2020, ensuring policy continuity and applicability.

The key points of the announcement are listed as follows:

Special Industry Deduction Policy

• Applicable Industries: Cosmetics manufacturing or sales, pharmaceuticals manufacturing and beverage manufacturing (excluding alcohol manufacturing) industry.

• Deduction limit: Up to 30% of annual net sales.

• Excess amount: Permitted to carry forward and deducted in subsequent tax years.

Related-Party Enterprise Allocation Mechanism

• Where related parties have signed an agreement on the apportionment (“Apportionment Agreement”) of A&P expense.

• A&P expenses incurred by one party, not exceeding the pre-tax deduction limitation of 15% of annual net sales, can be deducted by that enterprise. Alternatively, part or all of the expenses may be allocated to the other party in accordance with the allocation agreement.

• The receiving party shall calculates its deduction limit excluding the A&P expenses allocated to it under the agreement.

Tobacco Industry

• A&P expenses incurred by tobacco enterprises shall not be deductible for corporate income tax purposes.

Human Resources

China Expands Enterprise Pension Coverage: Streamlined Approval, Flexible Contributions, and National Digital Platform in the Pipeline

According to the "Opinion":

• Enterprises, social groups, foundations, and private non-profit organisations are encouraged to establish enterprise pensions in accordance with the "Enterprise Annuity Measures” to expand coverage.

• Approval processes will be simplified with greater use of standardised templates and online filing systems. Enterprise pensions must not be established earlier than participation in the basic old-age insurance scheme.

• Both employers and employees contribute to the pension fund. Employer contributions shall not exceed 8% of total payroll, and total combined contribution shall not exceed 12%. Contributions may be adjusted flexibly within these limit and temporary reductions, suspensions or catch-up contributions are permitted.

• Qualified industrial parks may conduct pilot projects to expand coverage. Plans must be filed with the Ministry of Human Resources and Social Security and the Ministry of Finance for record purposes.

• A national enterprise annuity information platform and database will be developed to enhance data connectivity. Leveraging social security cards, employees will be able to conveniently access, transfer, and claim benefits.

• Public awareness initiatives will be strengthened through multiple channels, and enterprise annuity implementation may be considered in evaluations of harmonious labour relations and related recognitions.

Corporate Governance

China Opens Commercial Mediation to Foreign Participation 

On 31 December 2025, the State Council officially issued the Commercial Mediation Regulations, which will come into effect on 1 May 2026.

The Regulations clarify that

• commercial mediation organisations may engage commercial mediators with professional influence and credibility as mediators,

• confirm the legal binding force of commercial mediation agreements,

• allow for overseas enforcement of mediation settlement agreements;

• and support the establishment, rule alignment, and cross-border cooperation of foreign commercial mediation institutions in Pilot Free Trade Zones, the Hainan Free Trade Port, and the Guangdong-Hong Kong-Macao Greater Bay Area.