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, and contracts and invoices to platform payments and tax filings. We 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.

I’m sure many of you in the cross-border e-commerce business have come across the term “Saiwei Model 2.0” recently. This is especially true for sellers who have received tax inquiries or are concerned about non-compliant transaction records on their platforms—it’s highly likely that many of you have wondered: Can this model solve my problems? How exactly do I implement it? Or will I end up falling into a new trap?

When I chat with friends in the cross-border e-commerce industry, seven out of ten ask this question. The most common question is: “I heard the model has changed and the old 1.0 version isn’t safe anymore. So, with 2.0, how exactly do we set up a store, handle exports, and receive payments? And what tax issues should we be aware of?”

Today, we’ll break these issues down clearly, walking you through each of the four stages you’ll encounter in practice—one by one—to identify the risks and explain how to make a safe choice.
01

First, understand the essence of the Savi Model 2.0

Many people get more and more confused the more they hear all these terms. But to put it simply, the Savi model is essentially a structural approach for cross-border e-commerce sellers to ensure financial and tax compliance.

In the early 1.0 version, the core strategy involved reselling domestic goods to overseas stores through a Hong Kong-based company, effectively keeping profits in Hong Kong and reducing the tax burden in mainland China. However, as the 1.0 approach was implemented, it became clear that many of the procedures were merely a formality to meet regulatory requirements, and any actual investigation would likely reveal issues. This led to the adjustments in Version 2.0.

Currently, there are two mainstream views on 2.0 within the industry. One is the “both ends outside” model, in which, after a Hong Kong company is sold, domestic stores sell directly to overseas customers; nominally, both procurement and sales take place overseas, so there is no need for customs clearance within China; The other is the “structural upgrade” model, in which core sales functions are transferred to local entities overseas, while the mainland retains only supply chain and technical services. Profits are allocated based on the amount of work performed; essentially, this adds genuine business logic to the model.

No matter which approach you choose, the fundamental goal is to ensure that business flows, cash flows, and invoice flows align, thereby reducing the risk of tax audits and back taxes. However, the difficulty and risks involved in implementing these two approaches are completely different. We’ll now break down the process step by step, following the actual procedures you’ll go through.

02

How to Set Up a Store Structure That Complies with Regulations

The first step in getting started is to set up the basic structure of your store. The best approach varies greatly depending on the scale of your business, so here we’ll discuss two common scenarios.

First, let’s say you’re running a store network with hundreds of stores and want to treat each one as a separate entity. According to this model, each store functions as an independent sales entity, requiring separate procurement and separate accounting for revenue and costs. While this sounds logical, the biggest problem in practice is that the costs become unsustainable. It’s unrealistic to hire an accountant for just one store; with 100 stores, that means 100 separate sets of books. The financial costs alone could eat up a significant portion of your annual profits—something small and medium-sized sellers simply can’t sustain. Moreover, even if you somehow manage to pull it off, there’s a hidden risk: if the stores are merely shells—with your domestic team still handling all core operations—and you force business traffic into them, tax authorities could easily classify this as a sham transaction. In that case, not only would your entire business model be for naught, but you’d also face additional penalties.

The second scenario is when you’re operating a large brand store that requires only a few core locations. In this scenario, it actually makes sense to adopt a split structure, where the stores function solely as entities registered on the platform, while core functions—such as product selection, pricing, and shipping—are handled by the back-office operations within China or by your local entity in the target market. This structure makes logical sense, but there’s one detail to watch out for: where do the cost invoices come from? If you source goods from a Hong Kong company, the Hong Kong company will only issue a pro forma invoice. Whether such an invoice can be used as a cost deduction in mainland China varies greatly depending on the interpretation of local tax authorities, creating significant uncertainty. If it is not recognized, you’ll have to pay corporate income tax on the full amount of that revenue—which would actually result in a loss.

According to 36Kr’s observations, when cross-border sellers restructure their operations today, most tend to adopt an approach that prioritizes “a lean storefront and a robust backend,” avoiding the concentration of too many operational functions within individual store entities—primarily to reduce accounting costs and compliance risks.

If you're still debating whether to register a separate business entity for each store, keep this in mind:The architecture should follow the business; don't force changes to the business just to fit a pattern. Your business is essentially a small team running multiple locations, but by forcibly splitting it into dozens of independently accounted-for units, you're essentially digging your own grave.

03

How to Ensure a Smooth Export Customs Clearance Process

Once you’ve set up your store, the next step is export customs clearance. Many people run into problems here simply because they misunderstand the concept of “both ends outside.”

First, let’s discuss the requirements of the first “both ends overseas” model: Nominally, both the procurement and sale of goods take place overseas, so there is no need to file customs declarations domestically—it is essentially a modified form of transshipment trade. However, there is a core issue here: Your goods are actually shipped from a domestic warehouse, meaning the point of origin is within China, which fundamentally fails to meet the transshipment trade requirement that “goods must be shipped entirely from overseas.” As a result, when you go to the bank for foreign exchange review, you won’t be able to provide genuine overseas shipping documents, and the review will be rejected. Furthermore, neither customs nor tax authorities in most regions recognize this model; if you insist on proceeding with it, you’re essentially laying your risks out in the open.

So, what is the proper procedure for compliant exports? Currently, there are two well-established approaches in the industry, depending on the situation:

• If your upstream supplier is well-regulated and can issue input invoices, simply use the 0110 General Trade or 9710 Cross-Border E-Commerce B2B Export codes, go through proper customs clearance, claim tax refunds where applicable, and claim tax exemptions where applicable. The process is transparent and straightforward, so you have nothing to worry about no matter who audits you.
• If you primarily source your goods from small and medium-sized factories and are unable to obtain input tax invoices, you can use the 1039 Market Procurement Model. This model was originally designed for exports without invoices; as long as you register with a designated market, you can export in compliance with regulations without paying value-added tax and still receive foreign exchange payments normally, thereby addressing a major pain point for many small and medium-sized sellers.

Many people ask, “Can the old method of ‘buying invoices’ for export still be used?” Let’s cut to the chase: Given the increasingly strict tax assessment policies in place today, using this method for export is a high-risk practice. Without input invoices, the VAT liability is effectively zero, which easily triggers tax alerts—and audits almost always uncover violations.

According to industry analysis by Business Insights, the trend toward compliance in cross-border exports is now very clear. The leeway for operations that previously relied on “gray-area” customs clearance will continue to shrink, making the early transition to compliant customs declaration procedures the most cost-effective way to mitigate risks.
04

How to Plan the Path for Receiving Funds

Once the goods have been exported, how does the money come back? This is a question on everyone’s mind. The biggest difference between the SAIWEI Model 2.0 and the old model in terms of receiving payments is that it requires a clear payment path—unlike in the past, when smuggling cards was a common practice.

In the past, many sellers would, upon receiving payments from the platform, use a third-party payment provider to directly withdraw funds to their personal bank cards. Today, this practice carries a very high level of risk. On the one hand, banks are now imposing increasingly strict controls on large personal deposits; if you receive hundreds of thousands or even millions at a time and cannot clearly explain the source of the funds, your account is likely to be frozen. On the other hand, since these funds have not been reported for tax purposes, an audit will reveal concealed income, and you will inevitably face back taxes and fines.

The SAIWEI Model 2.0 is currently being implemented. A relatively compliant funding pathway is as follows: platform proceeds are first deposited into the account of your local entity in the target market; then, a Hong Kong company acts as an intermediary for settlement; finally, the required funds are repatriated to the mainland entity through trade in services or dividends. Every step of this process is supported by corresponding business contracts and documentation, ensuring that the entire flow of funds can be clearly explained to any auditor.

Here’s a reminder about a risk that’s easy to overlook: Many people register Hong Kong companies solely for the purpose of channeling funds, without engaging in any actual business operations—they have neither a real office address nor local employees. In such cases, the tax authorities may easily determine that the “place of effective management is in the Mainland,” meaning all profits of the Hong Kong company would be subject to Mainland corporate income tax at a rate of 25%—which is higher than what you would have paid without this structure. This makes the arrangement completely counterproductive.

So if your structure includes a Hong Kong company, be sure to remember: you must conduct substantive operations—even if it’s just renting a small office or hiring a local part-time employee—you need to demonstrate that substantive operations are taking place. This isn’t a waste of money; it will save you from much larger fines.

05

Be Aware of These Risks Regarding Tax Compliance

The final and most critical step is tax compliance. The biggest change in the SAIWEI Model 2.0 is actually that it addresses the tax-related loopholes in Version 1.0; however, this does not mean that using Version 2.0 guarantees complete safety. Here are a few key risks you must be aware of in advance.

The first risk,Unreasonable Transfer Pricing. When setting up their business structures, many companies route the majority of their profits overseas or to Hong Kong, retaining only a small portion in mainland China, claiming that their mainland operations merely provide supply chain services in exchange for a nominal service fee. This practice has run squarely into the crosshairs of current tax audits. Since you bear all the supply chain and operational risks within the mainland but only receive a few percent of the profits, this clearly violates the arm’s-length principle. Such arrangements are considered high-risk targets for special tax adjustments, and if detected, you’ll be required to pay back taxes plus late payment penalties.

So what is the correct approach? The standard compliance practice in the industry today is as follows: Domestic supply chain companies set prices by adding a markup of 5%–10% to their procurement costs to earn revenue from the supply chain; domestic operating companies charge an information service fee of 3%–8% of revenue to earn revenue from operational services. This pricing logic aligns with market principles, and it is essential to prepare the “Contemporaneous Documentation” in advance to prove that your pricing is reasonable. If you do face an audit, having this evidence ready will ensure you don’t have to panic.

The second risk,Risks Associated with the Designation of Permanent Bodies. Many companies outsource their sales functions overseas, but in reality, all core tasks—such as product selection, pricing, and customer service—are still handled by domestic teams, while the overseas company is merely a shell. This situation can easily be deemed as the overseas company maintaining a permanent establishment in China, resulting in all of its profits being subject to full Chinese corporate income tax—rendering your entire structure completely ineffective.

To avoid this risk, the key is for the overseas entity to actually perform substantive functions. For example, if you’re targeting the North American market, have the overseas entity handle local warehousing, local after-sales service, and local marketing—ensuring it genuinely fulfills these responsibilities. In that case, it’s reasonable for it to retain the corresponding profits.

The third risk,Data Discrepancies. These days, platforms automatically share merchants’ sales data with domestic tax authorities. If the income you report doesn’t match the platform’s transaction records, the discrepancy can easily be classified as concealed income—and there’s no need to elaborate on the consequences; everyone knows what they are.

To resolve this issue, the key is to ensure that every income transaction is supported by the appropriate documentation. If you distribute profits overseas, you must retain proof of tax payment from the foreign jurisdiction; for domestic expenses, you must have corresponding allocation agreements to demonstrate that the use of every fund is reasonable.

According to a survey by SellerHome, more than 60 percent of cross-border sellers encounter issues with transfer pricing and documentation retention when implementing new business models. These problems do not stem from the models themselves but rather from a failure to address operational details during implementation. For small and medium-sized sellers, handling these technical details on their own is indeed very difficult; seeking assistance from a professional firm to sort them out can save a lot of hassle.

Based on the practical experience distilled by Qicaiying, the key to successfully implementing the Savi Model 2.0 is not just setting up a hollow framework, but ensuring that every step is backed by actual business operations and a complete chain of evidence—so that even if an audit occurs, you can handle it with confidence. Currently, many sellers have only copied the outward form of the model without grasping its essence, which has led to problems—and this is the most regrettable outcome.
06

The Landing Method That's Right for You

After all that, let me wrap things up for you. The truth is, the Savi Model 2.0 isn’t a magic bullet, nor is it something to be feared—you need to choose based on your own circumstances:

If you’re just a small seller with modest annual revenue, there’s no need to force yourself to jump on this bandwagon. Instead, find a compliant way to export your goods, report your income accurately, and pay the taxes you owe—that’s actually safer than setting up a bunch of complicated structures.

If your business has already reached a certain scale and you have compliance requirements to begin with, you may want to consider making adjustments to upgrade your architecture. Keep the following core principles in mind:Make the architecture fit the business—don’t make the business adapt to the architecture....if you maintain a complete chain of evidence at every step, you can keep risks under control.

In fact, regardless of the model used, the core of cross-border tax compliance has never changed: the business must be genuine, the “three flows” must align, and profit allocation must be logical. If you meet these three criteria, you won’t have much to worry about, no matter how policies change.

Qicaiying specializes in providing one-stop financial and tax compliance services for cross-border e-commerce businesses, foreign trade companies, and entrepreneurs expanding overseas. Our 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 transaction records and tax filings, insufficient cost invoices, Hong Kong companies that have not been audited for an extended period, or uncertainty regarding the appropriateness of your current corporate structure, please add us on WeChat at 19076121147 for a detailed analysis tailored to your company’s specific business situation.