| Compliance is the cornerstone for cross-border sellers to develop soundly

With cross-border e-commerce tax regulation becoming increasingly stringent, the fiscal and tax compliance management of Amazon sellers has become a key part of business operations.Correct revenue recognition, tax differentiation and compliant filing can not only avoid tax risks, but also lay a solid foundation for the long-term development of the enterprise.

I. Revenue recognition principles: accruals at the core

Amazon sellers are required to recognize revenue in strict accordance with the accrual principle. Specifically, it should be based on the ”total sales” in the Amazon back office, not on the actual amount in the bank account. Revenue should be recognized when the goods are sent out, and there is no need to wait for the platform to pay you back.

For example, for a sale completed in October, even if the payback is not received until November, the revenue should still be included in the October filing cycle. The payback link only reflects the net amount after platform fees, which can be subsequently processed through an accounting adjustment.

II. Explanation of Major Taxes and Applicable Tax Rates

Highlights of VAT treatment

-small scale taxpayer: Quarterly sales of up to $300,000 are exempt; over $300,000 the 1% levy rate applies

-General taxpayer: Annual sales exceeding 5 million yuan are automatically converted to general taxpayers, applying 13% tax rate, with input tax credit available

Corporate income tax policy

-Small microenterprises: Preferential tax rate of 5% applies to the portion of annual profit not exceeding 3 million dollars; the portion exceeding 3 million dollars is taxed at 25%

-Export operations: Usually enjoys VAT exemption policy, but if it adopts the ”purchase order export” method and cannot provide compliant documents, the tax authority may treat it as domestic sales and levy 1% of VAT.

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III. Zero-declaration risk warning

Currently, the sales data of Amazon platform has been directly synchronized with the tax department, and continuous zero declaration will trigger the tax warning system. Stores with actual business but long-term zero declaration will face the risk of tax audit, which may lead to back taxes and fines.

Compliance Recommendations:

-Timely completion of registration of market entities and opening of public accounts

-Operating funds are regulated to flow through company accounts

-Ensure that the flow of funds and supporting documents are consistent with the substance of the operation.

-For expenditures for which invoices cannot be obtained, contracts, transfer records and other supporting documents are retained

IV. Specification of cost and expense credits

Reasonable expenses related to the Amazon platform, including advertising and promotion fees, platform commissions, FBA warehousing fees, etc., can be deducted before tax within the scope of the tax law. Relevant vouchers need to be properly kept for verification by tax authorities.

Special Note: Advertising expenses not exceeding 15% of the current year's operating income can be fully deducted (special industries in accordance with local policies), and the excess is subject to tax adjustments.

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V. Multi-store operation and management strategy

Tax management is based on the company entity, and each market entity is required to carry out account processing and tax declaration independently.

Compliance Management Recommendations:

1.Regularly download Amazon transaction reports and reconcile them with the financial books

2. Complete preservation of invoices, contracts, cost vouchers and other information to ensure that the accounts are in line with the actual situation

3. Enhance the knowledge of finance and taxation, or entrust professional organizations to carry out tax planning

4. Establish a perfect internal control system to ensure that the stores operate in a compliant manner

concluding remarks

Cross-border e-commerce tax compliance is a systematic project that requires sellers to pay constant attention to policy changes and adjust their business strategies in a timely manner.The establishment of a standardized financial accounting system can not only effectively prevent tax risks, but also provide strong support for the development of enterprise scale.

Sellers are advised to seek the support of professional tax consultants in due course according to their business scale and development stage to ensure that compliance and business development are synchronized.

【Welcome to pay attention to more cross-border e-commerce tax compliance guide to help enterprises develop soundly】!

If you want to know more about tax issues and tax solutions, please feel free to consult us! Bosses who don't want to spend time and effort can alsoFind us at Enterprise Caiying Group(Micro-signal: jingxinhenggs)help, arranging for professional managers to answer queries, provide professional advice andFull one-on-one service ↓↓↓

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# Amazon Taxes # Cross-Border E-Commerce Compliance # Tax Planning # Export Tax Refund # Corporate Income Tax

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