We specialize in providing one-stop financial and tax compliance services for cross-border e-commerce businesses, foreign trade companies, and entrepreneurs expanding overseas, helping them address issues ranging from corporate structure setup, daily bookkeeping and tax filing, and export tax rebates to tax planning, platform transaction compliance, Hong Kong company audits, and offshore business operations.

Today, Qicaiying (for inquiries, add us on WeChat: 19076121147) will provide a comprehensive breakdown of financial and tax compliance issues faced by cross-border businesses. covering everything from business models, fund flows, contracts, and invoices to platform payments and tax filings. We’ll help businesses proactively identify risks and avoid issues such as discrepancies between transaction records and tax filings, insufficient cost documentation, and disorganized accounting—which can lead to back taxes, fines, or even tax audits.

Is SEVI 1.0 Becoming Obsolete? Why Are Cross-Border Sellers Being Forced to Switch to 2.0?

Recently, many cross-border sellers have been asking the same question: Why is the “Saiwei Model 1.0”—which everyone used to rely on—becoming increasingly difficult to sustain? In the past, cross-border sellers could simply set up their stores, ship their goods, and collect payments, putting off many issues for the time being. A domestic company handled procurement and exports, while a Hong Kong-based company managed platform payments; profits remained overseas, and only a portion of the revenue was reported in China. It seemed simple and flexible, with low tax costs. But today, many sellers are suddenly realizing that a model that used to work is now turning into a time bomb that could go off at any moment. Platform transaction records are becoming increasingly transparent, bank funds are easier to verify, and the relationships between customs declarations, logistics, invoices, payments, and corporate reporting are becoming harder to explain away with just a few contracts. The so-called “Saiwei Model 2.0” is not, at its core, simply switching to a different Hong Kong company or re-registering a few new entities. Rather, it is about cross-border sellers being forced to reorganize their previously chaotic operations into a clear and accountable business structure.

I. What is the so-called “Saiwei Model 1.0”?

First, let me clarify: “Saiwei Model 1.0 and 2.0” are not official tax terms, but rather colloquial terms used in the cross-border e-commerce industry to refer to different business structures. The so-called “1.0” model typically involves the following: a domestic company handles procurement, inventory management, and exports; a Hong Kong company is linked to the platform store and handles payment collection; sales revenue from the platform is deposited into the Hong Kong account; the mainland company recognizes revenue based on procurement costs, service fees, or export amounts; and the majority of profits remain with the Hong Kong company. In the early days of the cross-border e-commerce industry, this model did indeed help many sellers resolve issues related to payment collection, settlement, and overseas operations. However, many sellers later distorted its original purpose. The Hong Kong company has only a bank account, with no staff, office, or actual business records; the mainland company handles products, operations, advertising, logistics, and after-sales service, yet retains only a small portion of the profits; while the platform generates tens of millions in annual sales, the mainland company reports only a tiny fraction of that as revenue; goods, invoices, funds, and contracts are scattered across different entities, leaving no one able to clearly explain the complete transaction. This is no longer merely a structural issue. Rather, the company’s actual business operations and its accounting records have gradually become two completely different narratives.

II. Suntech 1.0’s Biggest Crisis: It’s Not High Taxes, but a Lack of Clarity

Many cross-border business owners are still asking, “My money is already in Hong Kong—how could the Chinese tax authorities possibly know about it?” This is precisely where the real danger lies. Today’s regulators no longer rely solely on how much revenue a company voluntarily reports; instead, they reconstruct business operations from multiple angles. Platform back-end data shows how much you’ve sold; bank account records show how much money you’ve received; customs data records how much cargo you’ve shipped; logistics records show where the goods went; purchase invoices show what you bought; and advertising, warehousing, and operating expenses reflect the true scale of operations. When all this information is pieced together, the core question is whether the company’s original claims still hold up. A mainland company handles nearly all the work: R&D, procurement, operations, advertising, customer service, after-sales support, supply chain management, and administration. Yet in the end, it receives only a small service fee. Meanwhile, a Hong Kong company with no employees, no physical office address, and no actual management capabilities takes the lion’s share of the profits. The most difficult question to answer regarding this structure is: On what grounds does the Hong Kong company earn so much money? If you cannot answer this, the so-called “retained profits” may become the most glaring issue during subsequent tax audits.

III. Many sellers aren’t suddenly targeted for investigation; rather, their past issues have finally reached a breaking point.

The most frightening thing for cross-border businesses isn’t underreporting a small amount in a single year. It’s when, for three, five, or even more consecutive years, there remains a massive discrepancy between the platform’s transaction volume and the company’s reported figures. If the discrepancy is a few million in a single year, it could still be attributed to poor business organization. But when transaction volumes run into tens of millions year after year without complete accounting records, it becomes difficult to dismiss this by saying, “That’s just how the industry works.” Many business owners believe that just because no one asked about it in the past, it means there’s no problem. In fact, the opposite is true. Historical issues will not disappear on their own unless they are addressed. The higher the sales revenue and the more fiscal years involved, the more complex the supporting documentation—including contracts, invoices, logistics records, payment receipts, and audit materials—that will need to be provided later. The worst-case scenario isn’t simply having to pay a little back tax. It’s when a company suddenly realizes: past purchase invoices are missing; export records don’t match platform orders; its Hong Kong subsidiary hasn’t been audited; personal accounts contain a large number of payments collected and disbursed on behalf of others; there are no contracts for intercompany fund transfers; and profits have already been distributed without any commercial justification. At this point, even if the company wants to rectify the situation, it won’t know where to begin.

IV. Five Clear Signs That Savi 1.0 Is Failing

1. It is becoming increasingly difficult to conceal platform revenue. For cross-border platforms, the store entity, payment accounts, sales transactions, refunds, and commission records form a complete data chain. When companies declare only a small portion of their receipts but cannot account for where the remaining revenue has gone, the risks will only continue to rise. 2. The “shell company” phenomenon in Hong Kong is becoming increasingly dangerous. Many Hong Kong companies exist solely as certificates of incorporation and bank accounts—they have no staff, no physical premises, no operational records, and no complete financial statements or audits. Yet, substantial profits remain stagnant in their accounts for extended periods. The more money a company earns, the more it needs to demonstrate what actual functions and risks it has undertaken. 3. Profits of Domestic Companies Are Clearly Unreasonable: Domestic teams handle nearly all core operations yet consistently report losses or minimal profits, while overseas companies do almost no work yet consistently generate high profits. If this profit distribution persists over the long term, the company will sooner or later have to explain the related-party transactions and their commercial rationality. 4. The Gap in Cost Documentation Is Growing Larger Many sellers focus only on how to report revenue but overlook whether they can substantiate their costs. Purchases lack invoices; advertising fees are paid from personal accounts; logistics fees lack complete contracts; warehousing costs are paid by third parties on behalf of the company; and no supporting documents are retained for returns, compensation, or platform deductions. Ultimately, even if a company is willing to report its revenue, insufficient cost documentation may lead to situations where “turnover is high, profits are overestimated, and the tax burden suddenly increases.” 5. Increasing Complexity Among Multiple Entities Domestic companies, Hong Kong companies, store entities, payment accounts, procurement entities, and export entities are all distinct. Business owners view this as “flexibility.” However, from a tax and audit perspective, this may mean that no single entity can fully prove which entity actually conducted the transaction.

V. Why Are More and More Sellers Switching to Saiwei 2.0?

“Saiwei 2.0” is not simply a rebranding of Version 1.0. A true 2.0 addresses three key issues: business authenticity, clear roles and responsibilities, and reasonable profits. The responsibilities of the domestic company must be clearly defined. For example: product R&D; procurement and supply chain management; domestic team operations; advertising support; and export and logistics coordination. The responsibilities of the Hong Kong company must also be genuinely substantiated. For example: operating overseas stores; signing overseas contracts; receiving payments from platforms; overseas marketing; managing overseas warehousing and service providers; and handling fund settlements and overseas reinvestment. Transactions between the two companies cannot rely solely on a casual service fee invoice issued at the end of the month. Instead, they must include: genuine contracts; clear descriptions of services; a reasonable basis for pricing; records of actual delivery; and corresponding payments and accounting entries. This is the biggest difference between Version 2.0 and Version 1.0. Version 1.0 focuses on: how to collect money and where to allocate profits. Version 2.0 focuses on: whoever actually conducts the business should receive the corresponding profits.

VI. Suntech 2.0 is not intended to “pay less tax,” but rather to enable the company to continue growing.

Many sellers mistakenly believe that upgrading their business structure is solely about keeping taxes as low as possible. In reality, once annual sales reach 10 million or even higher, what truly matters is no longer paying a little less in taxes. Instead, the key questions are: Can the store operate stably? Can funds be repatriated normally? Will the bank freeze the account? whether the Hong Kong company can pass its audit; whether the business can secure financing or bring in shareholders; and whether the financial records will withstand due diligence when the store or company is sold in the future. A company with annual sales in the tens of millions that only has scattered cost entries and vague cash flow records in its books may appear profitable on the surface, but in reality, it has no corporate value whatsoever. No one will dare to invest, banks won’t dare to lend, buyers won’t dare to take it on, and even the owner won’t dare to repatriate funds on a large scale. A truly sound corporate structure isn’t just about enabling the business to sell products today—it’s about ensuring the business can continue to raise capital, expand, pay dividends, and facilitate an exit in the future.

VII. The True SEVI 2.0 Must Address These 6 Core Issues

1. Who recognizes the platform’s revenue? Since the store belongs to a specific entity, the sales revenue should have a clear owner. It is not acceptable for the platform operator to be one company, the entity receiving payments to be another, and yet a third company to recognize the revenue in its books. 2. How should responsibilities be divided between the mainland company and the Hong Kong company? The functions, personnel, assets, and risks assumed by the two companies must align with the profit distribution. It is unacceptable for the mainland company to handle all operations while the Hong Kong company is solely responsible for collecting payments yet takes nearly all the profits. 3. Are procurement, exports, and logistics properly aligned? Purchase orders, invoices, payments, customs declarations, logistics, and platform sales data should form a complete chain wherever possible. 4. Are cost supporting documents complete? A system for managing supporting documents must be established in advance for procurement, advertising, logistics, warehousing, commissions, refunds, and after-sales expenses. Do not wait until tax filing time to scramble for receipts. 5. Are the prices for related-party transactions reasonable? When a mainland company provides services, sells goods, or licenses a brand to a Hong Kong company, there must be a reasonable basis for pricing—not simply whatever the owner decides. 6. Does the Hong Kong company have commercial substance? This does not mean every company must rent a luxury office or hire a large number of employees. However, the company must at least have contracts, decision-making records, financial records, audits, and operational evidence that align with its business activities. Otherwise, the Hong Kong company will simply become the weakest link in the entire structure.

VIII. Which cross-border sellers should upgrade as soon as possible?

If any of the following situations apply, we recommend that you stop putting it off: The platform’s annual sales have exceeded 10 million yuan; you are operating multiple stores or sites in multiple countries simultaneously; you have been mixing the use of your mainland and Hong Kong companies for an extended period; there are significant discrepancies between your platform revenue and your mainland tax filings; large amounts of funds are being moved through personal accounts; long-term reliance on “buy-and-sell” export arrangements; a Hong Kong company that has not undergone accounting or audits for many years; incomplete documentation for procurement, logistics, and advertising costs; plans to secure financing, bring in shareholders, or sell the company; or the owner’s desire to legally repatriate overseas profits to mainland China. The larger your sales volume, the less you should continue to operate like a small seller. Issues encountered when annual sales are 1 million may merely involve non-standard accounting practices. However, when annual sales reach 10 million, 50 million, or even higher, the same issues can escalate into risks related to capital, taxation, and corporate operations.

IX. Many sellers fail to upgrade because they focus only on building the framework without adapting their business operations.

Upon hearing about SEVI 2.0, some sellers immediately registered new domestic and Hong Kong companies. However, their original business practices remained completely unchanged. Stores continue to list products under a jumble of entities; funds continue to flow through personal accounts; purchases continue to lack invoices; exports continue to rely on opaque agents; there are still no contracts between companies; and Hong Kong companies still undergo no audits. In the end, the situation has merely shifted from two chaotic entities to four chaotic entities. A true upgrade isn’t about registering a few more companies. It’s about re-examining the business from its very foundation: who signs contracts; who handles procurement; who manages exports; who operates the stores; who collects payments; who handles after-sales service; who bears the risks; and who ultimately reaps the profits. The organizational structure must align with actual business operations. Otherwise, the more companies you register, the more dispersed the risks become—and the harder they are to manage.

X. In Closing

Saiwei 1.0 didn’t suddenly stop working. What truly failed was that business model—one where companies only want to collect payments but refuse to keep proper accounts; only want to pocket profits but refuse to explain their operations; and only want to set up structures but refuse to leave any evidence. Once cross-border sellers reach a certain scale, the greatest danger isn’t an increased tax burden. It’s when a company generates tens of millions in annual sales yet lacks a comprehensive accounting system and business logic. If there’s even one inconsistency in the chain linking the platform, banks, customs, logistics, invoices, and corporate filings, the problems accumulated over the past few years could all come to light at once. Therefore, the transition from 1.0 to 2.0 for cross-border sellers isn’t about chasing some industry trend. Rather, it’s a necessary corporate upgrade that must be completed once sales scale up. Small sellers compete on product selection and operations. Large sellers compete on corporate structure, finance, taxation, and risk control. Sellers who are still using Hong Kong companies to receive payments, exporting under a single entity, operating under multiple legal entities, or whose platform transaction volumes differ significantly from domestic tax filings are advised to sort out their existing operations as soon as possible. We can conduct a preliminary risk analysis based on your company’s current: platform sales revenue, store entity structure, procurement methods, export routes, payment accounts, domestic and overseas company status, and cost documentation. First, identify the issues with your current model, then decide whether to supplement documentation, adjust business entities, or redesign your operational structure involving both domestic and Hong Kong companies. Don’t wait until your business has reached 10 million in turnover to realize you’ve been operating like a seller with only 1 million in revenue.

Qicaiying specializes in providing one-stop financial and tax compliance services for cross-border e-commerce businesses, foreign trade companies, and entrepreneurs expanding overseas. These services include corporate structuring, bookkeeping and tax filing, export tax rebates, platform transaction compliance, Hong Kong company audits, tax planning, and offshore business management.

If you are currently facing issues such as unclear accounting records, discrepancies between bank statements and tax filings, insufficient cost invoices, a Hong Kong company that has not been audited for an extended period, or uncertainty about whether your current corporate structure is appropriate, please add us on WeChat at 19076121147 so we can conduct a detailed analysis based on your company’s actual business operations.