I. What Exactly Is the Fixed-Rate Taxation System, and Why Is It Being Tightened?

Assessed taxation is a method used by tax authorities when a taxpayer’s accounting records are incomplete and it is difficult to accurately calculate the taxable income; in such cases, taxes are levied based on an assessed taxable income rate or an assessed tax amount. This method is based on the premise that ”it is indeed difficult to verify the accounts” and does not constitute a tax incentive.

In recent years, a large number of market entities have treated assessed taxation as a means to reduce their tax burden: registered sole proprietors split up their income and use assessed low tax rates as an alternative to audited accounting. With the ”Golden Tax Phase IV” initiative integrating bank transaction records, platform payment receipts, social security data, and invoice information, the system is now capable of automatically monitoring revenue scale, cash flow, and the consistency between purchases and sales. As a result, the premise that “audits are difficult” no longer holds true in many cases.

The result is:In 2026, tax assessment policies for individual businesses in the wholesale, e-commerce, and modern services sectors were comprehensively tightened, leading to widespread shifts to account-based taxation in many regions. Informal documents such as blank receipts and handwritten receipts are no longer recognized as the basis for tax-deductible expenses. There are regional variations in the specific implementation guidelines and timeline,Subject to the announcements issued by the competent tax authorities.The

II. The Four Categories of Entities That Were the First to Be Disqualified

Category 1: Shell sole proprietorships with no actual business operations. No office space, no employees, no social security contributions, and no warehouse or inventory—used solely for splitting transaction flows, issuing invoices, or abusing approved tax incentives. The system can identify multiple shell entities under the same legal representative through a natural person association graph and directly flag them as priority targets for investigation.

Category 2: Sudden spikes in revenue or consistently filing zero-revenue returns. A prolonged period of zero tax returns combined with ongoing platform payouts, or an abnormal surge in transaction volume over a short period of time, will trigger the revocation of the tax assessment and a retroactive assessment of past-due taxes.

Category 3: Significant gaps in cost documentation. For cases where the proportion of uninvoiced costs and unrecorded transactions is high, if an audit reveals a lack of valid supporting documentation, the taxable income will be significantly adjusted upward.

Category 4: Entities that receive preferential treatment but whose business operations do not align with the terms of the preferential treatment. Many business owners mistakenly believe that ”once they’ve applied for a tax incentive, they can enjoy it permanently.” In reality, tax incentives are subject to specific substantive conditions; if the nature of the business does not meet these conditions, even if the incentive has already been claimed, a subsequent tax audit will result in the requirement to pay back taxes plus late payment penalties. This is particularly true in regions such as Hainan, where local tax incentives are in place.

III. The Substantive Differences Between Tax Assessment and Audit

| Dimension | Fixed-Rate Taxation | Audited Taxation | | — | — | — | | Tax Base | Based on the assessed taxable income rate or tax amount | Based on income after deducting costs and expenses from actual revenue | | Accounting Requirements | Relatively lenient bookkeeping requirements | Complete accounting records must be maintained, with a complete chain of supporting documents | | Deduction of Costs | Does not rely on individual supporting documents | Must have valid and lawful supporting documents | | Risk Factors | Retroactive tax payments required after disqualification | Income amounts may be adjusted upward due to missing supporting documents |

The point is:The audit and transfer of accounts is retroactive; it does not take effect only as of the date of the notice. After disqualification, past periods may be recalculated based on an audit-style review, and back taxes may be assessed—this is the greatest risk exposure.

IV. Procedures for Completing Accounting Records When Switching to Book-Based Taxation

Step 1: Verify that the reported income matches the actual cash flow. Export all transaction records for your store from the past 12 months. Compare these with the income reported for VAT and business income tax purposes; if the difference exceeds 10%, this is considered high-risk. You should file an amended return for any unreported income as soon as possible.

Step 2: Create a comprehensive income ledger. Consolidate platform orders, payments from corporate and personal accounts, refunds, and platform fees so that every revenue transaction can be traced back to a specific order.

Step 3: Strengthen the cost documentation chain. Verify each cost invoice individually to ensure that every invoice corresponds to actual purchase, logistics, and warehouse receipt documents. For small, incidental expenses for which invoices cannot be obtained, invoices should be issued on your behalf through official channels or replaced with compliant supporting documents.

Step 4: Finalize the expense allocation rules. Rent, utilities, logistics, advertising, platform commissions, and employee salaries are grouped by period and purpose; expenses not related to business operations are not deductible for tax purposes.

Step 5: Improve accounting records and financial statements. Set up general ledgers, subsidiary ledgers, and journal entries; generate monthly income and expense statements; and avoid ”year-end catch-up entries”—with real-time monitoring, it has become very difficult to avoid the risks associated with year-end catch-up entries.

V. Special Considerations for Cross-Border E-Commerce Sellers

Cross-border e-commerce and individual foreign trade operators also face another common risk:Export Invoicing + Foreign Exchange Receipts into Personal Accounts. Freight forwarders handle customs clearance and issue invoices, while payment for the goods flows into offshore accounts or personal bank cards for currency exchange, without going through formal customs clearance or tax declaration procedures. Once customs, foreign exchange, and tax data become interconnected, a cross-check between the declared customs value, overseas remittances, and book revenue reveals a complete disconnect among the four flows, which may be classified as tax evasion and illegal foreign exchange evasion.

A viable alternative is to switch to compliant channels, such as the 1039 market procurement trade scheme, by receiving foreign currency through a corporate foreign currency account in a transparent manner and paying taxes in accordance with regulations, thereby eliminating dual risks related to foreign exchange and taxation.Specific eligibility requirements are subject to the regulations of local commerce and tax authorities.

The benefits of the fixed-rate tax assessment system are coming to an end. Rather than waiting to be disqualified and then passively paying back taxes, it’s better to proactively bring your accounting into compliance with the audited-accounting standards—the sooner you make this transition, the smaller your retroactive tax liability will be.

Qicaiying provides sole proprietors and cross-border e-commerce entities with services including accounting reconstruction for the transition from a fixed-rate tax system to an audited accounting system, strengthening of the voucher chain, and guidance on tax filing.