Cross-border e-commerce tax compliance and European market expansion guide

Cross-border e-commerce is booming around the world, especially in the European market. Europe not only has a huge group of Internet users, but its e-commerce market is second only to the United States and is expected to surpass the United States by 2025. For sellers looking to enter this market, it is crucial to understand and comply with local tax regulations.

European market overview

The European region includes Germany, France, Italy, the United Kingdom and other countries, which constitutes Amazon’s second largest source of traffic. As one of the largest economies in Europe, Germany is China’s largest trading partner in the EU, with total bilateral trade reaching 212.7 billion euros in 2020. Germany adopts a federal tax-sharing system, with tax legislation relatively centralized but distributed among the federal, state and local governments.

Tax Compliance Essentials

1. Provide real data and documents

On platforms like Allegro, the Polish Tax Bureau has launched strict tax audits on all Chinese sellers. Sellers need to provide real data and keep necessary documents such as VAT reports, VAT invoices and sales reports.

2. B2B order processing

For B2B orders, sellers should be careful in invoicing to ensure that the information is accurate and cannot be modified. The tax bureau may verify the seller based on the buyer’s declaration.

3. Tax declaration and payment

• VAT: In cross-border e-commerce, VAT is an important tax. Different countries and regions have different regulations.
• Tariff: Depending on the nature of the goods and national policies, tariffs may be required.
• Import value-added tax: Different from general value-added tax, it is a tax on the value-added amount in the import process.
• Sales turnover tax: It is levied based on the value-added amount generated during the sale of products.
• Income tax: Pay at different rates based on corporate profits.

4. Follow local regulations

• Companies doing business in Europe need to register for VAT and file tax returns as required.
• Sellers must display the VAT tax number in the listing.

International tax environment

China Tax Policy

China’s tax system covers eighteen types of taxes, including value-added tax, corporate income tax and personal income tax. The objects of taxation are the specific objects stipulated in the tax law, and the taxpayers are enterprises and individuals.

New regulations on cross-border e-commerce

Since 2016, China has implemented a series of new policies for cross-border e-commerce, including a positive list system, tax reform, etc., aiming to unify the tax system for cross-border e-commerce and traditional trade.

Coping strategies

Establish a sound tax compliance system

Enterprises need to establish sound financial and tax management systems, conduct internal controls and audits, and ensure that relevant tax information is accurately recorded and reported.

Seek professional advice

By cooperating with professional tax consulting agencies, we can keep abreast of the latest policies and formulate risk prevention and control strategies.

Utilize international cooperation mechanisms

Use international tax cooperation and free trade agreement mechanisms to reduce repeated taxation and avoid double taxation.

To sum up, if cross-border e-commerce companies want to develop steadily in the European market, they must pay attention to tax compliance and ensure that all operations comply with local laws and regulations.