As Domestic Business Grows, Tax Payments Become Increasingly “Fictitious”: A Cross-Border E-Commerce Seller’s Journey Toward Compliance in Hong Kong

Many business owners in the cross-border e-commerce sector run into the same problem:

“Domestic companies lack invoices, their profits are inflated, and paying taxes is a real pain.”

“Since the platform’s payments go through my personal account, I’ve always felt uneasy—I’m afraid I’ll get audited one day.”

“You’re thinking about registering a Hong Kong company, but you find it a hassle—registration, opening a bank account, bookkeeping—it all sounds like a real headache.”

Shenzhen tax authorities have currently identified 70,000 cross-border e-commerce businesses that have filed zero tax returns. The number of businesses that have underreported their taxes is too large to count.

This isn't a random check; it's a systematic screening.

You might be one of them. With annual sales in the millions or tens of millions, your domestic company has consistently filed zero tax returns. You used to think, “It’s fine—no one will check.” But now, the system has flagged you.

Starting in March 2026, tax authorities in Shenzhen, Chengdu, Hangzhou, and other cities will conduct direct telephone audits; those who file zero returns or submit inconsistent reports will be required to pay back taxes. Cross-border e-commerce sellers in Shenzhen, Changsha, and other locations have been receiving telephone audits from tax authorities, which are focusing on three high-risk groups: those who have consistently filed zero returns, those who have failed to report overseas income, and those whose reported data does not match platform records.

Just because nothing has happened over the past three years doesn't mean this won't happen to you. And now, it's happening.

Many sellers who operate multiple store groups follow this practice: they have several stores, each linked to a different company. Some are registered under their own ID cards, some under friends’ names, and some under relatives’ names. Payment collection is even more chaotic—some funds are transferred to personal bank accounts in mainland China, some go into Hong Kong company accounts, and some are left directly in the platform’s wallet.

You might not even know yourself which company corresponds to which store, or which payment account corresponds to which entity.

Some sellers believe this “spreads the risk”—keeping sales below 5 million for each business to maintain small-scale taxpayer status. That is, until 2026, when “penetrative supervision” goes into effect, and the tax authorities will be able to pinpoint each business with pinpoint accuracy by analyzing IP addresses, warehouses, cash flows, and relationships between legal representatives.

Those strategies designed to “diversify risk” may actually be turning into “concentrated risk.”

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Reaching 10 million in revenue isn’t the end goal—it’s the starting point for upgrading our infrastructure. When a single company handles all business operations, the risk is concentrated on a single entity—audits, account freezes, and fines can bring the entire operation down in one fell swoop. […]