"E-commerce tax compliance is the sword of Damocles hanging over the heads of many e-commerce business owners in recent years. Especially at a time when tax-related information reporting has become a trend, "paying taxes" has become a must-answer question from a multiple choice question.

However, when it comes to fiscal compliance, the first reaction of many e-commerce owners is, "You simply can't afford it." This is not alarmist talk, but is dictated by the industry's unique business model.

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01 Three major pain points in e-commerce tax compliance

Pain point 1: Downstream can't get tickets, costs can't be deducted

This is by far the most prevalent and almost insoluble dilemma.

• status quoThe vast majority of suppliers, small factories and individual sellers are unable to provide compliant invoices, especially VAT invoices. In order to get the goods, e-commerce companies often need to accept "no invoice price".
• dilemma::
  • Tax Points: You offer to take on the tax point to allow downstream invoicing, but this amounts to a tax burden shift and the cost is ultimately absorbed by you.
  • For individual sellers: If the downstream is an individual, even if you are willing to bear the tax points, the other party can not issue an invoice. Unless the other party specifically goes to register an individual with an authorized levy, but this is usually only possible with a general invoice.Failure to address the core VAT input credit issue. The VAT chain is essentially broken here.

Pain point 2: High advertising and marketing costs, far exceeding pre-tax deduction limits

This is a permanent pain in the heart of platform e-commerce and store group model players.

• realism: In today's high cost of traffic, almost no e-commerce company with a sizable revenue can keep its advertising costs (platform promotion, live stream casting, etc.) within 15% of revenue. Especially merchants who rely on the store group model to rush volume, paid traffic is the lifeline to maintain exposure.
• policy contradiction: The tax law stipulates that advertising and business promotion expenses incurred by general enterprises are allowed to be deducted up to 15% of the sales (business) income of the year; the excess is allowed to be carried forward for deduction in the subsequent tax year. However, for e-commerce companies whose advertising expenses often account for 20%, 30% or even more, theSignificant excess is not deductible in the current year, which directly pushes up the current taxable incomeThis is equivalent to paying an additional tax for "buying traffic" itself.

Pain point 3: High return rates erode revenue and complicated tax treatment

This is a characteristic challenge for consumer goods e-commerce, especially in industries such as apparel and footwear.

• industry practice: "seven days no reason to return" has become the standard, clothing and other categories of return rate as high as 30%-50% is not uncommon.
• Financial and tax implicationsA high return rate means that a large portion of the recognized revenue will eventually flow back. Although it can be handled by "sales return" in accounting and tax, frequent returns bring huge workload to the practical aspects such as invoicing, offsetting, cost transfer, etc., and if it is not handled in a timely manner or in a standardized manner, it will lead to a loss of revenue.Over-recognition of income and over-payment of tax in prior periodsThe funds are unreasonably tied up.

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02 The Compliance Dilemma: Where are the profits after regulation?

These three pain points stack up to create a harsh reality:Once tax compliance is strictly enforced, many e-commerce companies will have to pay high taxes on the portion of their profits that is "not their true profit".

Let's take an e-commerce company with a pure store model as an example of a short account:

Assume that its merchandise gross margin is only 15% (which is not uncommon in competitive platform e-commerce).

• value-added tax (VAT): At the rate of 13%, if there is a significant shortfall in input votes, VAT will be payable on almost 13% of sales.
• surplus after tax: 15% of gross profit, after deducting 13% of VAT, leaves only 2%.
• corporate income taxThe "gross profit" of $2% has to be deducted from operating expenses (of which a large number of non-billable expenses and over-limit advertising costs are not deductible), and the final book profit may be minimal or even negative, but after tax adjustments, the taxable income may still be very high.

Therefore, e-commerce tax compliance is not as simple as simply making the accounts "beautiful" and importing the water into the bookkeeping software. Rough "standardization" may lead to an embarrassing end: the account is standardized, but the company has lost its ability to survive due to excessive tax burden. This is particularly fatal for owners of store clusters where margins are already thin and turnover is based on scale.

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03 Breakthrough Ideas: Finding a Balance Between Compliance and Survival

Since tax-related information reporting is a major trend and the road to compliance must be traveled, the key is:How do you find a solution that meets regulatory requirements while allowing e-commerce businesses to pay taxes and retain profits?

This requires planning and optimization at an integrated level of business model, tax structure and financial management:

1. Business re-engineering and supply chain grooming: Revisit the upstream supply chain to find a new balance between price and compliance. Gradually replace key suppliers with partners that can provide compliant tickets, even if the cost of purchasing goes up slightly, but obtaining deductible input tickets can recover from the overall tax burden.
2. Master Design and Tax Planning: According to the segmentation of business segments (e.g. store groups, live banding, offline sourcing, etc.), rationally utilizing the tax policies of different market players (e.g. preferential policies for small and micro enterprises and individual businessmen), and carrying out a grouping or matrixed layout. For segments with high non-invoiced expenditures such as Darren Carrying Goods, explore modes such as settlement through compliant platforms to convert labor remuneration into purchasing costs that can be invoiced.
3. Accurate accounting and bookkeeping: Establish a financial accounting system that is highly compatible with the e-commerce business. In particular, we carry out refined account processing and tax preparation for special items such as returns, promotion fees and platform fees to ensure accurate data and avoid paying more taxes than necessary.
4. Policy Research and Compliance Innovation: Pay close attention to and study tax policies and local financial support policies for new businesses such as e-commerce and live broadcasting. Under the premise of legal compliance, it has utilized various tax incentives and approved levies and other tools.

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There are also different program ideas for different stages of corporate tax compliance:

Start-up period (sales)(up to 20 million)

Pain Points:

1, C-end sellers, open more than one Amazon store, more than one account company, the address is dependent, did not open an account, employees have not purchased social security, are on private payroll, what are the risks?

2. Will there be any risk if the account company has zero declaration for a long time and has not set up financial books?

3, from the third-party payment platform, the transfer of funds to personal accounts, the country almost never paid taxes, worried about the risk?

4、What is the impact of Golden Tax IV on cross-border sellers' collection, and will the way of taking the third-party collection channel be affected?

5, just started the small and medium-sized sellers, profits are very low, pay the tax will not make money, how to do?

Solution:

1, the companies timely and compliant operation of tax returns, reasonable distribution of employee wages and social security, to ensure the normal operation of the enterprise;

2、With the help of Hong Kong offshore companies to collect foreign exchange, combined with the domestic company's customs declaration and tax rebate (exemption) declaration, to build a good enterprise funds collection channel, to ensure that the funds sunshine collection;

3. Reasonable control of tax liabilities and avoidance of tax risks;

4, clear arrangements for professionals to do professional things, the boss can fully do a good job of the product and the market. There are fiscal compliance issues can be swept to add our online customer service (WeChat: jxhAna888), to arrange for managers to answer questions, provide professional advice and full one-on-one service!

Developmental period ((20-100 million)

Pain Points:

1, industry and trade in one Amazon seller how to do export tax rebates, what qualifications are needed, how much volume to do?

2、Amazon normal remittance back to the personal account account, the amount of money is very big worry about bank verification and unpaid personal tax, scattered more than one private account receipts can make the risk reduced? How to avoid the risk?

3、Paying suppliers through private accounts without invoicing, and then selling through the Amazon platform and collecting foreign exchange through a third party, how to comply?

4, do half a year of business, store results look good, as the boss, no money in hand, there are a bunch of goods, do not know how much money they earn?

Solution:

1、Rapid identification of cross-border e-commerce enterprise financial and tax risks; 

2. Avoidance of the risk of collection of large sums of money and the response to bank verification; 

3. Accurately make tax declaration and export tax refund declaration; 

4, clear cross-border e-commerce four-stream process logic; 

5、Master enterprise sales and inventory data, clear enterprise capital flow; 

6, build the enterprise's financial accounting system, financial data for management to provide business decisions.

Maturity ((>100 million)

Pain Points:

1, I heard that there are big sellers of part of the profit from export tax rebates, a year can save 10% cost, this kind of said is true?

2、Every month will use different logistics methods (express + air + sea) to ship, how to accurately calculate the logistics cost and gross profit?

3、Inventory takes up too much money, want to do a good job of inventory management, do not know how to optimize?

4, big sellers want to absorb excellent partners, equity ratio how to design, how to do management and share incentives?

5、We are a billion seller, I'm going to go capital listed in the future, so how should our structure be designed now?

Solution:

1. Be able to read and understand the 3 major statements and 5 major financial indicators of business operations. 

2. Design better performance commissioning principles in conjunction with report analysis. 

3. Know how to better utilize data for good business management. 

4. Familiarize yourself with the principles of input-output matching and calculation models; 

5. Knowledge of VAT filing and planning ideas appropriate to the country of operation; 

6. Designing a shareholding structure suitable for the development of the enterprise, and preparing tax planning and legal risks in advance; 

7. Clear equity incentives for the core management team, retaining core talent, and better assisting the development of the enterprise; 

8. Open the boss's mind to attract excellent partners and investment and financing platform resources.

Cross-border e-commerce has long since passed the "wild growth" stage. Tax compliance is no longer an option, but an infrastructure for business continuity, capitalization and risk isolation.

Compliance is not a cost, but the biggest safety guarantee and growth gas pedal for enterprises. In the second half of cross-border e-commerce, those who live well are not necessarily the fastest runners, but they must be the most stable walkers.

If you are also a cross-border e-commerce seller with more than ten million dollars in annual sales and are facing:

• Lack of invoices, heavy VAT burden
• Multiple entities operating in disarray and increasing risk
• Profits are inflated and you don't know how to comply to optimize your tax burden

We can offer you that:

• Exclusive cross-border tax compliance diagnosis
• Multi-body Architecture Sorting and Optimization Solution
• Customized tax planning solutions
• Compliance roadmap proven by millions of sellers in the field

Tax compliance issues can be swept to add our online customer service (cell phone WeChat the same number: 16625410105), to arrange for managers to answer questions, provide professional advice and full one-on-one service!