Abstracts: Regulatory logic has completely turned, cross-border sellers, regardless of where the company will be registered, as long as the legal person is a Chinese identity, business data will be captured in full and reported to the domestic tax authorities. “Just moved the main body to Hong Kong, received a reporting notice, white toss a”, “U.S. companies registered stores, the same received China tax reporting mail” ...... cross-border e-commerce sellers Group, the panic atmosphere of the past two days almost overflowed the screen.

March 27, Amazon suddenly pushed the fourth quarter of last year's tax data, originally thought that only domestic subjects will be reported to the sellers of the collective confused - with Hong Kong companies, U.S. companies registered stores, as long as the legal person holds a Chinese identity card, all received the content, based on the terms of almost word for word Chinese tax report mail. The rules of cross-border tax supervision have undergone a fundamental shift.

01. Raid

A tax data push email from Amazon has created a tsunami in the cross-border e-commerce world.

Sellers in the group thought that this push only involved domestic subjects, but the reality gave everyone a blow, with Hong Kong companies, U.S. companies registered stores, as long as the legal person is a Chinese citizen, all received the exact same China tax report.

“The title, the content, and the statutory provisions on which it is based are almost word for word.” Some sellers in the group posted screenshots of emails received by different subjects for comparison.

A just completed the store main body migration seller helplessly said: “Taking great pains to move the store to Hong Kong main body, turn around to receive a notice of reporting, it is simply a waste of time.” Another U.S. company registered store sellers were lucky to avoid domestic regulation, the results were also not spared, “then what is the point of taking the trouble to register an offshore company?”

The regulatory logic of the cross-border e-commerce industry has fundamentally shifted, and the era of relying on offshore structures to avoid taxes in the past is considered to have come to a complete end. Supervision no longer only looks at the company's place of registration, but directly penetrates to the actual controller, as long as the legal person is a Chinese citizen, belonging to China's tax residents, the data will be captured and reported in full.

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02. Penetration

This data push was not a system error or a random event.

Since the third quarter of last year, in accordance with the relevant provisions, such as Amazon offshore e-commerce platforms need to report quarterly to the Chinese tax authorities to the Chinese sellers of the complete data, and this four-quarter data push, directly breaking the “offshore subjects are not in the scope of the report” of the industry's tacit understanding.

Hong Kong company stores receive the reporting requirements are identical to the mainland subjects, the United States company as long as the legal person is a Chinese identity is also not spared. The platform pushes the detailed data, including identity information, transaction amount, income and expenditure, commission, exchange rate conversion, etc., and the content submitted to the tax department is completely synchronized, which is not possible to report, but has been actually handed over.

Regulation has shifted from the past territoriality principle to the principle of personhood plus substantial control. As long as the actual controller is a tax resident of China, even if the company is registered in any corner of the world, as long as it generates business income on the platform, the data will be reported through. Behind this is a regulatory network woven together by regulatory requirements, the Golden Tax System and CRS tax-related information exchange, and the Controlled Foreign Enterprises Rule, where offshore account information is automatically exchanged back to the home country, and the platform's operating data is directly connected to the tax system. The profits of a shell company that does not actually operate abroad will also be taxed as if they were distributed back to the home country.

It used to be wherever the company was taxed, but now it's become that the person is Chinese and global income is subject to regulation.

03. Collapse

Has the offshore tax avoidance structure failed completely?

Offshore companies that operate solely for tax avoidance and only as shells have basically lost their original purpose. After going through the cost of registering a Hong Kong or U.S. company and trying to hide the revenue, the platform data is now penetrated and the capital information is exchanged. Through big data comparison, the tax department can easily find the huge difference between the declaration and the actual revenue, which directly triggers the risk warning. Once recognized as a controlled foreign company, even if the profits are not distributed, the same tax should be paid in accordance with the law.

Offshore companies are not worthless, but the premise is to have real business substance, real office space, local personnel, actual business decisions, and even complete the formal record of foreign investment, rather than simply used to collect money to avoid tax shell. But for the vast majority of small and medium-sized sellers, such costs and conditions are simply difficult to bear. The days of relying on a different subject to easily avoid taxes are gone.

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04, Signal

The signals released by this incident could not be clearer.

Supervision has realized no dead-end coverage and no longer distinguishes between domestic and foreign subjects. As long as the seller is of Chinese background, no matter what subject is registered, there is no place to hide the business data, and overseas is no longer a place outside the law and the so-called tax haven.

Big data has realized the whole chain through the customs, logistics, platforms, payment, banking, tax data connected to each other, each seller's real business situation, the system is even clearer than the sellers themselves. Compliance has long been not optional, but the bottom line of survival. In the past to check and then make up the tax of the lucky space is getting smaller and smaller, nowadays the data direct connection, automatic comparison, active warning, zero declaration, low declaration, two sets of accounts, funds outside the body cycle and other operations, have become a very high business risk.

At the end of last year, we have been reminded many times that it is no longer meaningful to replace the main body and build a complicated structure, but it is a waste of time and cost.

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05 Conclusion: there is only one surest path

Cross-border e-commerce from the early years of barbaric growth, gray arbitrage, and gradually towards data transparency, full compliance, is an inevitable development trend. The myth of offshore tax avoidance is broken, in fact, also means that the industry is moving towards standardization, by speculative bad money gradually lose space, down-to-earth operation of compliant sellers can finally usher in a fairer environment.

Instead of complaining and lamenting, it is better to give up the idea of fluke, make the accounts clear, make the tax compliance, and make the business solid. The data has been lying in the system, can not hide and can not run away, the sooner the initiative to comply, the sooner the peace of mind business.

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Enterprise Caiying Group is deeply committed to the field of enterprise services, business coverageShenzhen, Guangzhou, Shanghai, Beijing, Hangzhou, Hong Kong, USA, Japan, Korea, Southeast Asia, Singapore, BVI, Caymanand other major economic zones around the world. We not only provide company registration, bank account opening, annual audit, but also focus on the pain points of cross-border e-commerce sellers:Cross-border e-commerce operation, FDI filing, offshore investment structure compliance buildingThe

Whether you are a start-up seller who needs to register a domestic company to get started, or a big seller who needs to set up a red chip structure to raise funds overseas, Enterprise Caiying can provide full life-cycle services.

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