The "Double 11" has ended. In previous years, e-commerce platforms such as Tmall have already announced amazing sales during the Double 11 period (November 1-11), but this year, no relevant data has been released on any platform. However, the author found that multiple media reported a set of sales data for cross-border e-commerce. During the "Double 11" period, the Shenzhen Customs accumulated more than 60 million import and export lists under the supervision of the cross-border e-commerce management platform, an increase of about 40% year-on-year. Cross-border e-commerce can maintain a reverse growth trend under the impact of the epidemic, and it has clearly become a growth point that cannot be ignored in China's economic development. According to the Economic Daily, "In the first three quarters of this year, the total import and export volume of cross-border e-commerce in Guangdong exceeded 300 billion yuan." In Guangzhou, Shenzhen, and other places in China, there are a large number of small and micro enterprises engaged in foreign trade export business through cross-border e-commerce platforms. While they are developing rapidly, they have hidden many tax risk points due to inadequate understanding of tax legal documents. Here, the author takes the reader to understand the common tax related risk points of cross-border e-commerce export enterprises and the key points of tax compliance, hoping to bring inspiration to cross-border e-commerce practitioners.

1、 Cross-border e-commerce business model

Cross-border e-commerce refers to an international trade method in which transaction entities belonging to different customs areas enter into transactions and conduct settlement through e-commerce platforms, and achieve the delivery of goods through cross-border logistics. The main business models of cross-border e-commerce are as follows:

（1） B2B (business to business) model

Enterprises mainly use e-commerce for advertising and information dissemination, and the transaction and customs clearance processes are basically completed online and offline. This is essentially a traditional foreign trade business.

（2） B2C (business to consumer) model

Domestic enterprises directly face foreign consumers, mainly selling personal consumer goods, small tools and equipment. In terms of logistics, they mainly use air bags, mail, express delivery, and other methods. Their customs declaration entities are postal or express companies. These foreign trade enterprises are mostly small and micro enterprises, mainly individual proprietorship enterprises and individual businesses, with tens of thousands of employees and many tax risk points.

In addition, if differentiated according to sales methods, it is also possible to build a cross-border e-commerce sales platform sales model or use a third-party cross-border e-commerce platform sales model.

2、 Common tax risk points for cross-border e-commerce export enterprises

As an export enterprise, the biggest risk point for cross-border e-commerce export enterprises lies in the high incidence of "fraudulent export reporting or other fraudulent means to defraud national export tax rebates by fabricating, forging, or illegally purchasing cross-border e-commerce export orders, value-added tax invoices, export goods declaration materials, foreign exchange collection vouchers, etc.". However, in addition to this, as cross-border e-commerce itself, especially for practitioners of small and micro foreign trade enterprises, there are also special risk points: such as not conducting tax registration, collecting funds from private accounts, undercalculating the total income of the enterprise, and not obtaining legal and valid purchase vouchers.

（1） Tax registration not performed within the time limit

It is understood that many practitioners of cross-border e-commerce export enterprises have started operations after obtaining their company business licenses, and have not conducted tax registration in accordance with the law.
According to Article 15 of the Tax Administration Law, enterprises should complete tax registration within 30 days after receiving their business licenses. However, many small enterprises engaged in cross-border e-commerce operate without tax registration, and the income they receive is not subject to tax liability. In fact, once the tax authorities initiate inspection or inspection procedures, or the banks and tax systems achieve interoperability, the overseas income of enterprises cannot be concealed from the tax authorities. The tax authorities have the right to verify and collect their income in accordance with the provisions of Article 37 of the Tax Administration Law, and impose administrative penalties in accordance with the provisions of Article 60.

（2） Failure to obtain legal and valid purchase vouchers and register in the comprehensive test area has resulted in the inability to apply the VAT and consumption tax refund and exemption policies

At present, the vast majority of cross-border e-commerce practitioners in China are still operating in the form of registered sole proprietorship enterprises or individual businesses, mainly selling household goods and small equipment and instrument products, showing the characteristics of selling a large number of categories and selling a small amount of goods. Many small and micro export enterprises complete procurement in China based on order requirements, and then directly ask upstream suppliers to send their products to express companies, which then transfer them overseas. Practitioners who are exporters do not retain purchase invoices, nor do they have transportation documents for the transportation of goods. If the enterprise has not registered in the Comprehensive Pilot Zone, according to the provisions of the "Notice on Tax Policies for Cross-border E-commerce Retail Export" (CS [2013] No. 96), "obtaining legal and valid purchase certificates for purchasing export goods" is a prerequisite for cross-border e-commerce export enterprises to enjoy value-added tax and consumption tax refund (exemption) policies. Therefore, cross-border e-commerce export enterprises may not be able to enjoy the VAT and consumption tax refund (exemption) policies because they have not obtained purchase invoices.

（3） Falsely issuing special VAT invoices to defraud export tax rebates

According to the current national support policies, cross-border e-commerce export enterprises can enjoy the policy of "tax refund with tickets, tax exemption without tickets". For "invoiced" enterprises, the most common tax risk point is the major tax illegal act of falsely issuing special value-added tax invoices to defraud export tax rebates.

Falsely issuing special VAT invoices to defraud export tax rebates is the most common and serious tax risk point for export trade enterprises. This illegal act is manifested in: obtaining tax refund qualification to defraud export tax refund; Falsely exporting goods and providing false certification materials to defraud export tax rebates; Exporting non refundable goods and providing false certification materials to defraud export tax rebates; Exporting refundable goods but providing false certification materials to obtain additional export tax rebates.

According to the provisions of Paragraph 1 of Article 66 of the "Law of the People's Republic of China on the Administration of Tax Collection", if an export enterprise fraudulently obtains a national export tax refund through false export declaration or other fraudulent means, and the tax authorities verify that it is true, the tax authorities have the right to pursue the payment of the tax refund it fraudulently obtains, and impose a fine of not less than one time but not more than five times the amount of tax fraudulently obtained. Therefore, if an export enterprise constitutes a fraudulent export tax refund, it will not only pursue the payment of the fraudulent export tax refund, but also face a fine of between one and five times the amount of the fraudulent tax.

In addition, according to Article 204 of the Criminal Law of the People's Republic of China, "Whoever fraudulently obtains a tax refund for exports from the State by falsifying exports or other fraudulent means, if the amount involved is relatively large, shall be sentenced to fixed-term imprisonment of not more than five years or criminal detention and shall also be fined not less than one time but not more than five times the tax defrauded; if the amount involved is huge or if there are other serious circumstances, he shall be sentenced to fixed-term imprisonment of not less than five years but not more than 10 years and shall also be fined not less than one time but not more than five times the tax defrauded; if the amount involved is especially huge or if there are other especially serious circumstances, he shall be sentenced to "Term imprisonment or life imprisonment, and a fine of between one and five times the amount of tax defrauded or confiscation of property.".

In other words, if cross-border e-commerce export enterprises apply for export tax rebates, if there is any fraudulent behavior, it can be as light as pursuing the payment of the refunded tax and imposing a fine, and the right to export tax rebates will be suspended; In serious cases, it constitutes the crime of defrauding export tax rebates, and the relevant responsible personnel bear criminal responsibility.

（4） Collection of sales revenue from private accounts leads to inability to calculate total revenue and underpayment of corporate income tax

Some cross-border e-commerce practitioners use personal accounts to collect export income in order to pay less taxes, but do not include the amounts collected from personal accounts in their total income. According to Article 2 of the Announcement on Issues Related to the Verification and Collection of Income Tax on Retail Export Enterprises in the Comprehensive Pilot Zone for Cross-border E-commerce (MOFCOM Announcement No. 36, 2019), cross-border e-commerce export enterprises in the comprehensive pilot zone should accurately calculate their total income before applying a taxable income tax rate of 4% to verify and collect. In other words, if an enterprise sets up an account privately and does not include income in the total amount, it will directly result in underpayment of income tax.

According to Article 63 of the "Law of the People's Republic of China on the Administration of Tax Collection", a taxpayer who forges, alters, conceals, or destroys account books or accounting vouchers without authorization, or overstates expenses or omits or understates income in the account books, or refuses to declare after being notified by the tax authorities, or makes false tax returns, or fails to pay or underpays the tax payable, is guilty of tax evasion. "If a taxpayer evades tax, the tax authorities shall pursue the payment of the tax that he fails to pay or underpays, as well as the late payment fine, and impose a fine of not less than 50% but not more than five times the amount of tax that he fails to pay or underpays."; If a crime is constituted, criminal responsibility shall be investigated according to law.

3、 Key points of tax compliance for cross-border e-commerce export enterprises

（1） Fully understand and appropriately apply national tax preferential policies

1. Register in the comprehensive pilot zone and handle export declaration at the customs at the registration place to apply the "no ticket tax exemption" policy

According to the Notice of the Ministry of Finance, the State Administration of Taxation, the Ministry of Commerce, and the General Administration of Customs on the Tax Policy for Retail Exported Goods in the Comprehensive Cross-border E-commerce Pilot Zone (CS [2018] No. 103), VAT and consumption tax exemption policies shall be implemented for e-commerce export enterprises in the comprehensive pilot zone who export goods without obtaining valid purchase certificates and meet the following conditions: (1) E-commerce export enterprises shall register in the comprehensive pilot zone, "And register the export date, goods name, measurement unit, quantity, unit price, and amount on the cross-border e-commerce online comprehensive service platform at the place of registration.". （2） Export goods are subject to e-commerce export declaration procedures through the customs at the location of the comprehensive test zone. （3） Export goods are not goods for which the Ministry of Finance and the State Administration of Taxation have explicitly cancelled export tax refund (exemption) in accordance with the decision of the State Council.

The above policy is commonly referred to as the "tax free without ticket" policy, but it has clear applicable conditions: enterprises need to register in the comprehensive pilot zone, handle export declaration procedures at the customs where they are registered, and provide corresponding materials. Therefore, enterprises should pay attention to the applicable prerequisites of this preferential policy.

2. Tax declaration according to law, accurate accounting of total income, and full application of corporate income tax preferential policies

The state provides sufficient tax incentives to cross-border e-commerce export enterprises, especially for small low-profit enterprises in cross-border e-commerce. With the support of national preferential policies, tax returns are normally conducted, and the corporate income tax burden rate is also extremely low.

Article 2 of the Announcement on Issues Related to the Verification and Collection of Income Tax for Retail Export Enterprises in the Comprehensive Cross-border E-commerce Pilot Zone (MOFCOM Announcement No. 36, 2019) stipulates that cross-border e-commerce enterprises approved and collected in the comprehensive pilot zone should accurately calculate their total income and adopt the taxable income rate method to verify and collect enterprise income tax. The taxable income rate is uniformly determined at 4%. Article 4 stipulates that cross-border e-commerce enterprises that implement the approved collection in the comprehensive pilot zone that meet the conditions for preferential policies for small low-profit enterprises can enjoy the preferential policies for income tax for small low-profit enterprises; "If the income obtained falls within the category of tax exempt income specified in Article 26 of the Enterprise Income Tax Law of the People's Republic of China, they may enjoy preferential policies for tax exempt income.". The first paragraph of Article 1 of the Announcement of the State Administration of Taxation on Implementing the Preferential Policies for Supporting the Development of Small and Micro Profit Enterprises and Individual Industrial and Commercial Enterprises (Announcement No. 8 of the State Administration of Taxation in 2021) stipulates that the portion of the annual taxable income of small and micro profit enterprises that does not exceed 1 million yuan shall be included in the taxable income at a reduced rate of 12.5%, and the enterprise income tax shall be paid at a tax rate of 20%. Article 1 of the Announcement on Further Implementing the Preferential Policies for Income Tax for Small and Micro Enterprises (Announcement No. 13 of the State Administration of Taxation in 2022) states that for small and low-profit enterprises with an annual taxable income exceeding 1 million yuan but not exceeding 3 million yuan, a reduction of 25% shall be included in the taxable income and a corporate income tax rate of 20% shall be paid.

According to the provisions of the above documents, the income tax burden rate of small low-profit cross-border e-commerce export enterprises registered in the comprehensive pilot zone has been extremely low. If an enterprise still evades payment of taxes by illegal means, it is not worth the loss.

（2） Self inspection and self correction, and focus on daily tax compliance management

With the popularity of cross-border e-commerce sales business, groups of personnel have flocked to the cross-border e-commerce export industry, and the legal compliance of cross-border e-commerce export enterprises' operations and income has also been quietly included in national regulations. Taking Guangzhou as an example, the Guangzhou People's Procuratorate, the Guangzhou Municipal Bureau of Commerce, the Guangzhou Postal Administration, the State Administration of Taxation, the Guangzhou Municipal Taxation Bureau, the Guangzhou Market Supervision Administration, the Guangzhou Customs, Huangpu Customs, and the Guangzhou Municipal Committee of the China Council for the Promotion of International Trade jointly issued a notice on the issuance of the "Guangzhou Cross-border E-commerce Industry Compliance Guidelines (Trial)" on July 15, 2022, The purpose of this document is to "give full play to the functions of procuratorial supervision and administrative supervision, prevent and reduce illegal and criminal activities in the cross-border e-commerce industry, guide cross-border e-commerce business operators to enhance compliance awareness, standardize business behavior, promote high-quality development of the cross-border e-commerce economy, and help modernize the national governance system and governance capacity." It can be clear that the tax compliance construction of the entire cross-border e-commerce export industry should be paid attention to. Practitioners in this industry should complete the following tasks as soon as possible.

1. Complete tax self inspection and correct tax non-compliance

Export enterprises targeting cross-border e-commerce have also entered an era of strict regulation. With the application of big data in tax inspection, any tax violations will be identified by big data. Therefore, if cross-border e-commerce export enterprises have tax non-compliance in their past operations, it is recommended to promptly conduct self inspection and self correction, and fully and effectively communicate with the tax authorities to avoid more serious legal consequences.

2. Carry out tax registration according to law

Cross-border e-commerce export enterprises should actively complete tax registration, set up and maintain account books and vouchers, operate in accordance with the law, and avoid the tax risk of administrative penalties for not doing tax registration.

3. Pay attention to the retention of daily transaction data

Regardless of the domestic goods procurement process or the export process, information related to the purchase and sale of goods should be truthfully recorded and stored, including: capital transaction records, logistics information, purchase or export dates, goods names, measurement units, quantities, unit prices, amounts, etc., to verify the authenticity of the transaction, and fully enjoy the preferential tax policies granted by the state.
4. Use a public account to conduct transactions, truthfully recognize income, and complete tax returns on time

With the advent of the era of "managing taxes by numbers", tax big data has been widely used in audit work. Information between tax authorities, banks, and other institutions is moving towards interoperability and sharing. Taxpayers' taxable income has already been under national supervision, so it is not advisable to take chances. Taxpayers should promptly recognize income from overseas income and complete tax returns.

summary

The state has taken advantage of preferential tax policies to provide significant support for the development of the cross-border e-commerce industry. With the advent of the era of "managing taxes by numbers", information from multiple departments such as tax, banking, customs, and payment platforms will be exchanged. Whether it is a company or a natural person, their income will be under strict national supervision. Tax violations that have not yet been exposed are not covered by tax big data. Therefore, cross-border e-commerce practitioners should focus on tax compliance to achieve long-term development through standardized operations.