On June 23, as soon as the National Audit Office’s 2025 audit report was released, the finance community was abuzz, while the cross-border community remained quiet.

But the fact is—This time it’s the banks and the tax authorities who are taking the heat, but next in line will most likely be us.

First, let's look at a few sets of data:

4,976 businesses issued invoices in violation of regulations to claim tax credits, thereby evading taxes 10.935 billion

20 Companies Evaded Value-Added Tax and Other Taxes in the Export Process 41.47 million

Local Tax Authorities Overcharge or Collect Taxes and Fees in Advance 40.4 billion

Bank of China Engages in ”Padding the Ranks” to Disguise Private Funds as Public Funds to Evade Income Tax 2.367 billion, as stated by the National Audit Office: ”Improperly exploiting preferential financial policies for personal gain”

Cross-border workers reading this might be tempted to scroll past—”What does this have to do with me?”

The Bank of China’s maneuver involving 2.367 billion and the logic behind your Hong Kong company’s ”95% profit retention in Hong Kong” scheme are essentially the same thing: policy arbitrage that crosses the line.

I. How Exactly Did the Bank of China Fall?

To put it simply, it's very straightforward.

Income from the spread between stock and bond prices earned by publicly offered funds is exempt from corporate income tax under the regulations—this policy was originally intended for publicly offered funds that cater to the general public and attract retail investors. Private funds? They don’t qualify.

How did the Bank of China pull this off? They enlisted two subsidiaries to act as conduits, rounded up a large number of their own employees to ”make up the numbers”—with each contributing between 1 and 100 yuan—and forcibly disguised 11 private equity funds as ”publicly offered funds.” Once they had enough participants, they simply changed their status,2.367 billion in taxes were saved.

The National Audit Office places great emphasis on characterization:Deception, concealment, and false reporting. Under Article 201 of the Criminal Code, this is the minimum penalty for tax evasion.

Translated into plain language:Policy incentives are meant to help you do the right thing; if you use them as a tool for arbitrage, no one can help you.

II. What Cross-Border Workers Should Be Worried About Isn’t the 10.9 Billion, but the 41.47 Million

There is a passage in the audit report that is easy to overlook:“Twenty companies evaded 41.47 million yuan in value-added tax and other taxes related to exports.”

The amount may not seem large, but the National Audit Office specifically listed it separately—Exports will be the focus of the next phase.

Even harsher measures were outlined in the rectification report: the State Taxation Administration and the General Administration of CustomsAdded more than 20 new data-sharing items, thanks to this coordinated effort, more than 71 billion has been recovered, and more than 800 people have been dealt with.

What does this mean for cross-border sellers? The old practice of keeping three sets of books—one for customs declarations, one for platform sales, and another for payments received in Hong Kong—is essentially a thing of the past:

Starting in October 2025, Amazon, Temu, and TikTok Shop report Chinese sellers' identities, transactions, and revenue directly to the tax authorities on a quarterly basis,Issue an alert if the difference exceeds 5%

The tax authorities can now see customs declarations, declared values, and HS codes at a glance.

Full Implementation of the Chinese Version of CRS 2026; Automatic Reporting of Hong Kong Account Information

A while back, there was a seller in Shenzhen whose Hong Kong-based company received payments from Amazon but didn’t repatriate the dividends. The tax authorities used the CRS to track them down, and they caught every single one,Pay back taxes plus a fine of 4.8 million. This is not an isolated case.

III. Is Your Hong Kong Company a ”Real Entity” or a ”Shell Company”?

The Bank of China fabricated its status as a public offering by ”padding the numbers.”

What does "cross-border circle" refer to?“Mainland companies do the work, while Hong Kong companies rake in the profits.”—And it stayed down for 95%.

The OECD's FAR model for transfer pricing is clearly laid out; according toFunctions/Assets/RisksThree-tier classification:

Your mainland company handles procurement, operations, customer service, and after-sales support, while your Hong Kong company has just one bank account for receiving payments—In the FAR model, this is a ”pure payment collection platform,” with a profit cap of 3%.

Would you dare tell the tax authorities, ”My Hong Kong company earned 95% profits because…”? The words are on the tip of your tongue, but you can’t even make sense of them yourself.

Now let’s take a look at the new game-changing moves for 2026:Golden Tax Phase IV + Platform Reporting + Customs Data + CRS: Cross-checking of these four sets of data. The tax authorities keep a clearer track of your total sales, refunds, and remaining profits than even your own accounting department does.

IV. Five Self-Assessment Checklists for Cross-Border Business Owners

Don’t delude yourself into thinking, ”The National Audit Office is targeting banks and tax authorities—it has nothing to do with me.” The fact that the report was released at this juncture—as the 14th Five-Year Plan comes to a close and the 15th Five-Year Plan begins—is in itself a warning to the entire industry:Tax cuts ≠ regulatory relaxation; policy incentives ≠ arbitrage tools. If they dare to single out a major state-owned bank like the Bank of China, private enterprises certainly shouldn’t count on getting off scot-free.

If you're working on an architecture, quickly check these five points:

1. Do Hong Kong companies have a physical presence? Do the employees, office, decision-making records, and bank statements all match up? It’s a pure shell company—there’s a high probability it will be subject to a穿透 review this year.

2. Transfer AgreementPrice Retention Document — How much in service fees do mainland companies charge Hong Kong companies? Refer to the FAR for guidance, and quickly adjust arbitrary rates like 15% to the industry’s fair range of 3%–5%.

3. ”Three-Stream Alignment” in Export Tax Rebates” — If there are significant discrepancies in customs declaration amounts, platform sales, or foreign exchange receipts, address them yourself first—don’t wait for an alert to be triggered.

4. Don't touch itThe ”Tax Planning” Scheme Involving Tax Haven Rebates and Fiscal Refunds” — The National Audit Office’s report specifically highlighted ”tax planning that exploits tax havens, resulting in abnormally low actual tax burdens”—and that’s the next blow.

5. Previously used personal PayPal/Wanlihui accounts to privately receive payments from the platform... Make sure to record these transactions in the company's books immediately. The bank and tax data systems are now integrated, so frequent, large-amount transfers from personal to business accounts will trigger an alert.

If you have any questions, please feel free to contact us:Cell phone: 18676749275 ｜ WeChat: qcygscszk

concluding remarks

Here’s a harsh truth: It used to be ”if you got caught, it was your bad luck,” but now it’s ”if you haven’t been caught yet, it’s just because your turn hasn’t come up yet.” Out of the 72.6 billion in tax revenue lost due to collaborative tax administration, 71 billion has already been recovered through corrective measures—just think about that efficiency.

The cross-border e-commerce industry has moved past the stage where ”reckless inventory dumping, gray-market funds, and Hong Kong shell companies” were enough to guarantee success without much effort.Compliance isn't a cost—it's a lifeline.

With that 2.367 billion case involving the Bank of China right there, you have no choice but to believe it.

Enterprise Finance Group

If you’re wondering: How much of a Hong Kong company’s profits should be distributed? Should the corporate structure be adjusted? How should transfer pricing documentation be prepared? — Qicaiying specializes in global financial and tax compliance for cross-border e-commerce, offering services ranging from the substantive operations of Hong Kong companies, ODI filings, and transfer pricing documentation to CRS compliance, providingCan be implemented and stand up to scrutinyA one-stop solution.

It’s much less costly to conduct an architecture health check upfront than to wait for alerts to come in and then take corrective action.

If you have any questions, please feel free to contact us:Cell phone: 18676749275 ｜ WeChat: qcygscszk