What is your first reaction when you receive a risk alert or audit notice from the tax authority?

Many business owners have told me: "I'm panicking."

But panicking won't help. What really helps is figuring out what kind of situation you're facing and what to do next.

In this article, we’ll break down the three most common risk scenarios and provide you with a comprehensive set of steps to address them.

I. First, let’s get one thing straight: risk control and internal audit are two different things.

Many sellers confuse receiving risk alerts with being audited, but these are two completely different matters that require different responses.

Based on recent trends: Sellers with sales exceeding 10 million in Q3 and Q4 of 2025 were primarily subject to risk control measures in the first wave; those with sales exceeding tens of millions were more likely to be audited. The second wave of notifications for sellers with sales in the millions has already begun.

II. The Three Most Common Risk Scenarios

Scenario 1: A retail business has consistently filed zero tax returns for an extended period and has been flagged as a risk by the system following a comparison.

This is currently the most common scenario. A retail business has sales revenue from an e-commerce platform but has consistently filed zero tax returns, which triggered a risk alert following a data comparison under the Golden Tax Phase IV system.

The core issue: It’s not that you actively did anything wrong, but rather that there’s a discrepancy between the data you reported and the platform’s data, and the tax authorities are asking you to explain it.

Action Plan: Proactively contact your assigned tax officer to discuss whether you can apply for a fixed-rate tax assessment, and cooperate in compiling data on your platform revenue and corresponding domestic tax payments.

Scenario 2: A Hong Kong company receives payment and is questioned about its agreement control arrangement

The tax authorities are focusing on this: After a Hong Kong company receives payments from an online platform, where does the money go? Is it being used to transfer profits—which should be taxed in mainland China—to Hong Kong through related-party transactions?

In particular, for Hong Kong companies with no actual operations—those with only records of receipts but no purchase contracts, sales agreements, or staff—the tax authorities will question the nature of these funds.

Recommended Course of Action: Provide evidence of the Hong Kong company’s business substance (employees, office space, contracts, bank statements); compile evidence of taxes paid by the mainland export company and the operating company; and demonstrate that there has been no loss of tax revenue.

Scenario 3: Unclear fund flow paths; discrepancies between contracts and transaction records

When a Hong Kong company transfers funds to a mainland company—whether there is no payment contract, the contract exists but the amounts do not match, or the transaction shows a single transfer but the contract is split into multiple parts—it can be very difficult to explain these situations if they come under scrutiny.

Action Plan: Review the corresponding contracts and business documents for each transaction to ensure that payments for goods are made to the export company and service fees are paid to the operating company, and that the amounts, dates, and contract terms align across all three parties.

III. Complete Response Steps

Whether you’re subject to risk control or an audit, the first step isn’t to simply pay back taxes—it’s to get a clear understanding of your situation.

Step 1: Confirm the notification type

Is it a phone call or a written notice? Is it a risk alert or the initiation of an audit? The handling procedures vary significantly depending on the type, so be sure not to confuse the two.

Step 2: Organize Your Data

Export the platform revenue data for all store companies over the past three years (separately for Q3 and Q4), compare it with the reported data, and identify any discrepancies or gaps.

Step 3: Assess Your Overall Tax Compliance

How much VAT and income tax have the domestic export and operating companies paid historically? Is this amount sufficient to cover the taxes due on the platform’s revenue? If so, this provides a basis for concluding that there has been no loss of tax revenue.

Step 4: Communicate with the competent tax authority

If you are subject to risk control measures, proactively contact your designated supervisor to seek an opportunity for assessed taxation. If you are under audit, cooperate by providing the required documents as specified in the notice; do not admit to any issues on your own initiative, and do not take a confrontational stance.

Step 5: Prepare a Complete List of Documents

See the list below and make sure to have everything ready in advance—don’t wait until the tax authorities ask for it before trying to find it.

Scan the QR code to add a consultant for urgent audit response advice—don’t panic when you receive a notice; we’ll help you figure out what to do first.

Cell phone: 18676749275 ｜ WeChat: qcygscszk

IV. List of Documents for Tax Audit

According to the latest guidelines in the Q&A document, the following four categories of complete supporting documents must be retained:

Funds

·Third-party withdrawal data (Payoneer, Wanlihui, Lianlian, etc.)

· Bank statements from domestic and overseas banks (by company, by month)

· Platform payment records (warehouse rent, advertising fees, credit card top-ups, etc.)

Transaction-related

· Platform Transaction Summary (Quarterly)

·List of Platform Transaction Details

Procurement

·Purchase Contract (Supplier → Export Company)

·Purchase Reconciliation Statements and Invoices

Logistics

· Logistics Reconciliation Statement

· Logistics Invoices and Waybills

·Customs Declaration (to certify that the goods were exported in accordance with regulations)

If you need to prove the “four-stream integration” under the “purchase from overseas and export” model, you must also provide the following: the purchase contract between the store’s company and the Hong Kong company, payment records from the overseas company, proof of logistics tracking, and accounting records. Some tax authorities may also require an audit report for the Hong Kong company.

common problems

Q: Will those subject to risk control be investigated retroactively?

A: Based on recent practical experience, cases flagged by risk control are generally not subject to retroactive investigation; however, cases subject to an audit may be investigated retroactively, with the retroactive period potentially extending back to 2022, and fines may be imposed. The two situations are different in nature, so do not treat a risk control flag as an audit when responding, nor should you ignore it entirely just because it is a risk control issue.

Q: What is the difference between investigations involving tens of millions and those involving millions?

A: The first wave of risk notifications primarily targeted sellers whose sales exceeded 10 million in Q3 and Q4 of 2025; those with sales around 10 million were more likely to be subject to risk controls, while those with sales exceeding tens of millions were more likely to be audited. Subsequently, a second wave of notifications targeting sellers with sales in the millions has appeared in some regions; specific criteria may vary by region and batch.

Q: Does the adoption of a fixed-rate tax assessment eliminate all risks?

A: No. The assessment notice issued following the audit process serves as the most definitive basis for tax administration; verbal confirmations, unannounced audits, and system flags may merely represent interim measures. If new risk alerts arise in the future, retroactive audits, tax assessments, or adjustments to the assessment may still occur. Assessment-based taxation is not a one-time, permanent solution.

Qicaiying: Why Choose Us to Handle Audits?

What’s the most frightening thing about an audit? It’s not the amount you have to pay, but taking the wrong approach from the start—mistaking risk control for an audit, treating self-inspection as a tax adjustment, and preparing documents in the wrong order, which only leads to bigger loopholes the more you try to patch them up. Qicaiying has guided hundreds of sellers through this process and knows exactly where the pitfalls lie at every step.

✔️ A Five-Step Response Plan with Full Support:From the moment you receive the notice until the matter is finally resolved, a professional consultant will guide you through every step: notice analysis → document preparation → communication with tax authorities → corrective action plan → ongoing compliance support—ensuring you’re never left to face the tax authorities alone.

✔️ Standardized Documentation System:Cash flow, transaction flow, procurement flow, and logistics—when it comes to these four types of evidence chains, more is not necessarily better; rather, they must precisely align with the key points of focus for the tax authorities. Qi Cai Ying has established document checklist templates and review processes to ensure that every piece of material submitted stands up to scrutiny.

✔️ Best Practices by Category and Region:How to handle cases where risk control measures are triggered, how to handle written audits, and how to confirm covert audits—the response strategies vary significantly depending on the type of situation. The audit style in Shenzhen differs from that in Guangzhou, and we understand the ”rules of the game” in each region.

✔️ Reducing the Risk of Penalties:Through proper self-inspection and self-correction, proactive cooperation, and a complete chain of evidence, it is possible to secure a more lenient outcome. We won’t promise you that ”everything will definitely be fine”—that wouldn’t be responsible—but we will help you do everything within our power to minimize the risks.

We have assisted hundreds of cross-border sellers in Shenzhen, Guangzhou, Shanghai, Ningbo, and other cities with audit responses and tax compliance adjustments. Scan the QR code to add a consultant for urgent audit response consultations—if you receive a notice, don’t panic; we’ll help you figure out what to do first.

Cell phone: 18676749275 ｜ WeChat: qcygscszk