Cross-border e-commerce tax treatment and risk analysis

Cross-border export tax

Cross-border export tax mainly refers to export tax rebate, that is, the refund of the value-added tax and consumption tax actually paid on exported goods during the domestic production and circulation links. The export tax rebate system balances the tax burden on domestic products by refunding domestic taxes paid on exported goods, allowing domestic products to enter the international market at a tax-free cost, enhancing competitiveness and expanding export earnings.

Although countries rarely levy export taxes, cross-border e-commerce exports still need to pay attention to tax compliance issues. While the state encourages and supports cross-border e-commerce exports, it also gradually guides enterprises to comply with regulations and reduce tax burdens.

Cross-border export tax processing

E-commerce platform

The income and tax treatment involved in the cross-border export e-commerce platform are as follows:

• Platform service fee: Depending on the nature of the platform and service differences, e-commerce platforms usually charge listing fees, platform monthly fees, technical service fees, etc., which need to be calculated as “information technology service information system value-added services” Pay VAT.
• Transaction fee: E-commerce platforms charge different proportions of transaction fees according to business rules, and VAT must be paid according to “Business Auxiliary Service Brokerage Agency Service”.
• Other income: Domestic merchants who settle on overseas platforms, such as Wish, are not subject to value-added tax; foreign trade comprehensive service companies provide logistics, customs declaration and other services, and can declare tax refunds according to self-operated export regulations.

Domestic merchants

E-commerce export companies need to meet specific conditions to enjoy VAT and consumption tax refund (exemption) policies. If the conditions are not met, the value-added tax and consumption tax exemption policies will apply.

Domestic merchants engaged in general cross-border export business shall handle the export of general goods and enjoy VAT refund/exemption according to specific circumstances.

Cross-border e-commerce export tax risks

The tax risks faced by cross-border e-commerce export companies in the payment and settlement links mainly include value-added tax, corporate income tax and personal income tax. In addition, it is also necessary to pay attention to changes in tax policies in importing countries.

• Lack of VAT input invoice: Goods without invoice cannot be declared for export and receive foreign exchange normally, and special methods can only be used to solve the export problem.
• Settlement of foreign exchange into personal accounts to avoid corporate income tax: Collect foreign exchange into domestic personal accounts through third-party payment institutions to avoid corporate income tax and face tax risks.
• Failure to declare personal income tax in compliance with regulations: Directly transfer income into personal accounts and fail to declare and pay taxes in accordance with regulations.
• Tax collection and administration risks: If you falsify account books, fail to list income, etc., you will face fines or even criminal liability.
• Changes in tax policies of importing countries: The changing tax policies of various countries increase business risks.

Cross-border import tax

E-commerce platform

The main income of the e-commerce platform and its tax treatment are as follows:

• Platform service fee: Pay VAT according to “Information Technology Service Information System Value-Added Service”.
• Product price difference income from self-operation and direct procurement: Pay VAT on the goods sold.
• Advertising income: Pay value-added tax and cultural undertaking construction fees according to “Cultural and Creative Services – Advertising Services”.

Logistics and payment settlement

• Logistics fees: Pay VAT as “transportation services”, and international transportation services may be zero-rated or tax-free.
• Warehouse charges: Pay VAT according to “logistics auxiliary services warehousing services”.
• Settlement fee: Pay VAT according to “Financial Services to Direct Charge Financial Services”.

Cross-border import tax model

Cross-border e-commerce retail import models are divided into “direct purchase import” and “bonded import”. Under the direct purchase import model, the e-commerce platform is connected to the customs to realize real-time transmission of electronic orders, payment vouchers, etc. Under the bonded import model, merchants ship goods to domestic bonded warehouses in advance for stocking.

Cross-border import tax classification

Cross-border import taxes mainly include import tariffs, import value-added tax, import consumption tax, personal postal tax, etc. Import tariffs are designed to protect the domestic economy and limit imports by raising the price of imported goods. Import value-added tax is levied on the import link. Import consumption tax is levied on the turnover of imported consumer goods. Personal postal tax is an import tax levied on inbound passengers’ luggage and personal postal items.

Cross-border e-commerce tax risks

Cross-border e-commerce tax risks arise from changes in import and export tax policies. Cross-border import e-commerce tax risks mainly involve positive lists and customs clearance orders. Cross-border export e-commerce tax risks require attention to the changing tax policies of various countries.

To sum up, cross-border e-commerce companies need to pay close attention to changes in tax policies during the import and export links, plan tax arrangements reasonably, and avoid unnecessary tax risks.