Xiao Lin, who runs an online clothing business, previously set up a sole proprietorship to separate his income from live-streamed sales. Under the “fixed-rate taxation” system, he paid only a few thousand yuan in taxes per year—a significant savings compared to the audited assessment method.

In 2026, she received a notice from the tax authority stating that the assessed tax rate for her industry had been raised, and that the system had automatically cross-checked her purchase and sales records—since there were discrepancies between her books and actual inventory, she would have to pay additional taxes. She was baffled—if it was supposed to be “assessed,” why wasn’t it working anymore?

This article provides a comprehensive overview of the future of fixed-rate taxation for sole proprietors in 2026, explains why regulations are tightening, and outlines how e-commerce businesses can remain compliant while minimizing taxes. It’s recommended reading for anyone who uses sole proprietorships to route business transactions.

01

What Exactly Is a Fixed-Rate Tax Assessment?

Assessed taxation is a method used by the tax authorities to directly calculate taxes based on income or an assessed rate for taxpayers whose “accounting records are incomplete or cannot be accurately verified.” In the past, many e-commerce businesses, livestreamers, and freelancers relied on this method because it was low-cost and easy to implement.

There are two types: a fixed-amount tax (where a specific tax amount is set) and a fixed-rate tax on taxable income (where profits are calculated as a certain percentage of revenue and then taxed). The fixed-rate method does not mean “paying no tax,” but rather “simplified tax payment.”

In a nutshell: The fixed-rate tax assessment system is a simplified option reserved for small businesses that genuinely cannot scale up; it is not intended to serve as a “tax avoidance shell” for businesses with high turnover. In 2026, this line was redrawn.

02

Why Will There Be a Comprehensive Tightening in 2026?

The key word for tax regulation in 2026 is “substance.” With the Golden Tax Phase IV system integrating data from banks, WeChat, Alipay, invoices, and customs, the payment records of sole proprietors are virtually transparent within the system, and any significant discrepancy between the assessed profit and actual profit will be automatically flagged.

In 2026, several provinces and municipalities will eliminate or significantly reduce the application of the fixed-rate taxation method for high-profit industries such as entertainment, live streaming, e-commerce, and consulting, reverting to the audited-accounts taxation method. The State Taxation Administration has also repeatedly clarified that the fixed-rate taxation method will no longer apply to shell sole proprietorships and “invoice-issuing accounts” without actual business premises.

The data speaks for itself: In multiple cases in 2026, sole proprietorships—which operate without physical premises, staff, or costs—were found to have reclassified labor income as business income to qualify for a fixed-rate tax assessment. These actions were deemed tax evasion, and back taxes were assessed. The scope for “tax savings” through fixed-rate assessments is being systematically reduced in the era of big data.

If you’re facing a similar situation—you’ve been using a fixed-rate tax system for sole proprietorships and are worried about having to pay back taxes if this system is discontinued in 2026—we can help you assess your business model and design a genuine, compliant tax planning structure. Feel free to scan the QR code to contact Qicaiying’s online customer service (WeChat/Phone: 18620388671), and we’ll help you sort out this entire process from start to finish.

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03

Three Real Risks

First, industries subject to exclusion: For industries that were originally approved but will be phased out in 2026, the system will automatically switch to audit mode; those who haven’t prepared their accounts will be caught off guard. Second, joint liability for transfers from business to personal accounts: If payments received in a sole proprietor’s business account are transferred to the owner’s personal card, the Golden Tax Phase IV system will still monitor these transactions.

Third, discrepancies in input tax credits: If there are no input tax invoices for live-streaming advertising expenses or inventory costs, the audited profit will appear inflated under the audit-based tax collection system, and the tax burden may exceed the assessed amount—meaning you’ll have to pay back everything you “saved” previously. Many business owners miscalculate this, thinking that the cancellation of the assessed tax system simply means paying a little more; in reality, it entails back taxes, late payment penalties, and fines.

Reminder: Don’t assume that “my small sole proprietorship won’t be audited.” The audit approach in 2026 will be “system-based screening plus targeted spot checks.” Being small doesn’t mean you’re safe—data anomalies are what trigger an audit.

04

How Else Can E-Commerce Businesses Stay Compliant and Save Money?

First, operate a genuine sole proprietorship: have a physical location, staff, bank statements, and cost receipts; it can be assessed based on statutory standards or through an audit—just don’t use it as a shell company. Second, ensure the business division is genuine: have the sole proprietorship handle actual business operations such as design and marketing, and ensure consistency across the “four flows.”

Third, scale up operations by operating as a corporate entity: Once revenue picks up, a limited liability company—combined with proper bookkeeping and tax incentives for small and micro enterprises (an effective tax rate of 5% on annual taxable income of up to 3 million)—is often a more stable approach than struggling to keep a sole proprietorship afloat. Fourth, implement proactive invoice management: Keep invoices for all purchases, advertising spend, and warehousing.

Key Mindset: In 2026, tax savings will come from “accuracy + structuring,” not from “fixed assessments + shell companies.” Keeping accurate books is far more stable than gambling on the tightening of tax incentives.

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05

What should I do now?

First, check your industry: Find out whether your sole proprietorship’s industry will still be eligible for a fixed-rate tax assessment in 2026 by asking your tax officer or checking tax announcements—don’t rely on past experience. Second, organize your records and receipts: Before switching to bookkeeping, make sure your purchase, sales, and inventory records, as well as your cost receipts, are in order.

Third, scale up: For businesses with high turnover, use a corporate entity combined with policies for small and micro enterprises; do not try to weather the storm as a sole proprietorship. Fourth, stop “issuing invoices and routing funds”: Shell sole proprietorships will be a key target for cleanup in 2026.

In a nutshell: The fixed-rate taxation system for sole proprietors isn’t “dead,” but the practice of “using it as a tax-evasion tool” has essentially been shut down. The sooner you transition to genuine compliance, the sooner you can stop living in fear.

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