Although data from major e-commerce platforms appears to have rebounded recently, and Prime Day has repeatedly set new records, small and medium-sized cross-border e-commerce sellers on the front lines know all too well: traffic costs are skyrocketing, a wave of account suspensions is brewing beneath the surface, shipping rates are fluctuating wildly, and price wars among competitors are reaching a fever pitch… What’s even more critical is that,Under the "Golden Tax Phase IV" initiative and big data oversight, financial and tax non-compliance is like a ticking time bomb—the bigger the business, the more anxious you feel.

Especially for sellers who still use personal accounts to receive foreign exchange and rely on “double clearance with tax included”—a gray-area customs clearance method—compliant exports have become a Sword of Damocles hanging over their heads. In the cross-border e-commerce export sector, 0110 (traditional general trade) and 1039 (market procurement trade) are the two most widely used but also the most complex models in terms of regulations. Many sellers are often confused: Which path should my business take?

If you’re still struggling with how to repatriate overseas funds in compliance with regulations or how to bring “invoice-less” procurement into the open, then this article is the “lifeline” you’ve been looking for. This article will combine the latest regulatory documents and practical cases, for you to dismantle the core compliance operation guidelines of the two modes, so that you can understand at a glance, to avoid stepping on pits.

01 The 0110 Model: A Rigorous “Mainstream” Path—An Essential Journey for Top Sellers

Applicable objects: Medium- to large-sized sellers with stable upstream supply chains, the ability to obtain VAT invoices in compliance with regulations, and a commitment to standardized processes and reliable tax refunds. This represents the digital extension of traditional foreign trade, featuring the most mature regulatory framework and the strictest requirements.

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Four key steps—all of which are essential:

1. Qualifications and Identification: Get Your License First, Then Hit the Road
A company must possess import and export operating rights, complete “Foreign Trade Operator Filing” and “Customs Consignor/Consignee Registration,” and register on the “List” with the State Administration of Foreign Exchange. These are the legal prerequisites for conducting all compliant 0110 business operations.

2. Documents and the Four Flows: Interlinked and Retained for Five Years
“The Alignment of the Four Flows” is the lifeline of 0110; it refers toContract Flow, Invoice Flow, Goods Flow, and Cash FlowThey must clearly correspond and corroborate one another.

• Contract Flow: Sales contracts with overseas buyers and purchase contracts with domestic suppliers must be authentic and complete.
• Invoice Flow: You must obtain an invoice issued by a domestic supplier in which the item description and amount exactly match those on the customs declaration form.Special VAT Invoice...This is the “pass” for applying for a tax refund.
• Goods Flow: The goods must actually be exported, and shipping documents such as bills of lading must be obtained.Be sure to be wary of the “double clearance with tax included” modelIn this scenario, logistics documents often do not match customs declaration information. If customs conducts an inspection, the detention of goods and fines are just the beginning—the subsequent tax audit is the real nightmare.
• Cash Flow: Payments for overseas purchases must be received in compliance with regulations through the company’s foreign exchange account, and payments for domestic purchases must be made via business-to-business transfers.It is strictly prohibited to transfer funds through underground money transfer networks or to allow abnormal flows of funds between personal accounts.

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List of Evidence: A complete set of documents—including purchase contracts, customs declarations, special VAT invoices, shipping documents, and foreign exchange receipts—must be properly filed,Retain for at least five yearsThe

3. Tax Refunds and Filing: Accuracy Is the Only Standard

• Accurate Reporting: The declared value and description of the goods on the customs declaration form,HS CodeThe 100% code must be accurate. Incorrect declaration of the HS code may result in a failed tax refund or even severe penalties from customs.
• Typical case: A company in Yunnan was fined 163,000 yuan by customs for misdeclaring the HS codes of its exported goods.
• Issuing False Invoices Is Strictly Prohibited: Under the powerful “data comparison” capabilities of the Golden Tax Phase IV system, the legal consequence of issuing fraudulent VAT invoices is the crime of fraudulently obtaining export tax rebates,The maximum sentence is life imprisonment.The

4. Key Warning: “Joint and Several Liability” in Agency Exports”
If you choose to entrust an international trade company to act as your export agent, be sure to sign an agency agreement that clearly defines the rights and responsibilities of both parties. If the agent engages in improper conduct, the source supplier will be subject to strict scrutiny regarding the authenticity of its business operations.

02 Model 1039: The “Tax-Exempt” Fast Track for Small and Micro Sellers, a Lifeline for Purchases Without Invoices

Applicable objects: Small goods, wide variety,No Invoice (“Procurement Without an Invoice”) the vast number of small, medium, and micro cross-border e-commerce sellers. Its core advantage is the VAT “exemption without refund” policy, which offers relatively flexible operations.

To successfully implement 1039, four key requirements must be strictly adhered to:

1. Region and Actors: Within the “Special Economic Zone,” when “self-employed individuals”

• Region-specific: Business activities must take place within one of the 39 state-approved market procurement trade pilot clusters, such as Yiwu, Huadu in Guangzhou,Shenzhen South China Cityetc.
• Subject Selection: Usually expressed asa private firm (PRC usage)Register with the authorities. Note that if your annual sales exceed 5 million, you may be required to register as a general taxpayer.

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2. Trading and Reporting: Small Amounts, Follow the Rules

• Maximum amount per ticket: The declared value of goods per shipment shall not exceed $150,000.
• Product Consolidation: If there are more than 5 varieties, you only need to provide detailed declarations for the top 5 in terms of value; the remaining categories may be grouped together.
• Explicitly Prohibited: It is strictly prohibited to declare goods procured outside the pilot zone using the 1039 procedure.

3. Foreign Exchange Receipts and Taxes: Accounts must be registered, and individual income tax must be filed

• Foreign Exchange Compliance: Payment for goods may be made through a registered sole proprietorPersonal Foreign Exchange AccountFees may be collected, but they must be reported to the online platform.
• Payment of Individual Income Tax: You must file and pay personal income tax in accordance with the regulations (typically through a fixed-rate assessment); do not assume that being “tax-exempt” means you’re off the hook.

4. Three Compliance Strategies for Procurement Without Invoices (Essential Insights)
For goods without input invoices, stop using gray-market channels to purchase quotas—here are three legitimate alternatives:

• Option 1: Take Exit 1039 directly. The standard procedure: Goods are purchased through a pilot market and cleared through customs, thereby qualifying for a VAT exemption.
• Option 2: Transit Model (Compliance Framework). If overseas customers do not accept invoices issued in the name of a sole proprietorship, you may use “Exported to a Hong Kong company under Code 1039, then re-exported by that Hong Kong company” of the program.This requires you to set up a Hong Kong company in advance to serve as a transshipment trading platform.
• Option 3: Agree to tax assessment based on audited accounts. Establish a comprehensive financial accounting system, use procurement contracts, payment vouchers, and other supporting documents to substantiate costs, and comply with audit-based taxation.

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03 Summary: Understand the road conditions, choose the right lane—following the rules is the only shortcut

For cross-border e-commerce sellers:

• 0110 It is a “highway of compliance and tax rebates,” where conditions are excellent but compliance costs are high and regulation is strict.
• 1039 It is a “policy-driven alternative route” for micro and small businesses engaged in export activities without invoices; while there are restrictions on entry, the tax burden is light.

Which path you choose does not depend on personal preference, but rather on your source of goods, the scale of your business, and your management capabilities. In this era of strict regulation characterized by “data-driven tax administration,” the risks associated with any attempt to obscure business models or conceal their true nature have risen exponentially.

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