Strict investigation! A number of cross-border companies may have to pay back taxes

Tax compliance cannot be delayed.

Since the official launch of the fourth phase of the Golden Tax System last year, tax audits on exports have become increasingly rigorous. Cross-border companies have been continuously exposed to tax problems, ranging from hundreds of thousands to hundreds of millions. Many companies need to pay back taxes. The recent strict inspections by the tax bureau on export purchases have once again put cross-border sellers into a "vicious circle" that keeps them awake at night.

On one hand, there are strict tax inspections, and on the other hand, there are constant "frustrations" on the platform side. Sellers who should have been welcoming a surge in orders during the promotion period are tortured by various emergencies. They are suddenly hit by TRO bans and phishing emails have not stopped. Prime Day seems to have shattered their dreams of a surge in orders. The same thing is not only happening to SC sellers. Little do they know that Amazon has already started a new wave of rectification of its "own sons", and it seems that it wants to eliminate a batch of VC accounts to strengthen its own moat.

The tax bureau is conducting a strict inspection! A large number of cross-border companies have begun to pay back taxes

Domestic tax audits are tightening, and sellers in the industry are trembling with fear. In recent years, cross-border business has become more and more active, and some cross-border sellers have continued to use various "gray operations" to achieve the purpose of tax evasion. Buying and exporting is one of them, that is, borrowing other people's company names and export orders to complete customs clearance procedures. Behind the seemingly convenient operation method, it is actually not compliant and often violates the law.

Recently, with the tax bureau's increased inspection efforts, a group of "troubled" sellers have also been exposed.

"A Qingdao company was subject to a tax audit. The export volume involved in the case from 2020 to 2022 was as high as more than 400 million yuan, of which the value-added tax to be paid was approximately close to 4 million yuan," a seller revealed. The company's name had been used by multiple freight forwarders and cargo owners, and it involved a wide range of people.

It may seem like an isolated case, but it is actually a common occurrence. A seller who was involved in the incident advised his peers to act in compliance with regulations and revealed that in recent times, Qingdao Port has been inspecting almost every bill for customs declaration, and has detained hundreds of containers and demanded trade information. In response, sellers from many places felt the same way and claimed that Shandong had already found a lot of cases, and many factories had been closed directly and employees had been laid off. Some sellers also admitted that they had already paid a lot of taxes.

But before this, it was mostly industry insiders who were saying that provinces and cities organized concentrated business trips to collect taxes, and that people in Shanghai were also collected by the Shenzhen Taxation Bureau. Now that the official authorities have begun to hammer out the facts, customs and taxation authorities in various places have posted their own results.

Many companies , including Shenzhen *Rongtong Trading Co., Ltd., Shenzhen *Tong Yida Trading Co., Ltd., Shenzhen *Hao Supply Chain Co., Ltd., Shenzhen *Cai Sheng Supply Chain Co., Ltd., etc., have the behavior of exporting goods that are not subject to the export tax refund (exemption) policy, and failing to truthfully declare sales when declaring . The tax bureau requires companies to complete corrected declarations and pay taxes within 15 days from the date of receipt of the notice .

This is consistent with what some sellers have revealed: "Export companies have received notices from the tax bureau that they must conduct self-inspection and pay additional taxes starting from 2019, because the risk warning of the Golden Tax Phase IV system shows that the export amount on the company's customs declaration far exceeds the declared operating income." In fact, this situation occurred as early as last year. Many industry insiders advised their peers not to evade taxes by buying invoices for export and to act in compliance with regulations, but it did not attract much attention at the time.

Now, the strict inspection by the tax bureau has made a lot of sellers panic. According to industry insiders, the recent retrospective inspection targets the period from 2019 to 2024, involving ports across the country.

The tax bureau's goal is to recover the tax. The specific recovery method is for the tax bureau where the exporting enterprise is located to contact the customs broker, issue a "supplementary payment information form" to the customs broker, and the customs broker will provide the contact information of the freight forwarder and the owner of the goods, and finally ask the owner to pay the tax, requiring the VAT of 13% of the trade volume and the corporate income tax of 25%. Export enterprises without input invoices must be regarded as domestic sales and pay VAT and corporate income tax. Factory exports without customs declarations must also be regarded as domestic sales and pay taxes.

At present, many sellers have received tax payment notices. Some sellers said that they were fined 100,000 yuan for exporting orders. Some sellers said that their e-commerce company with a revenue of 60 million yuan was under investigation. Some sellers conducted self-inspections of taxes and paid the taxes overnight, totaling more than 120,000 yuan in taxes and late payment fees.

It is understood that many companies that pay for the export are huge in amount, and the nominal export companies are often shell companies that have only been registered for a few months. The possibility of being involved in a bankruptcy is relatively high. Once they are investigated, most of them will choose to flee or stay put. "The investigation has been very severe recently, and our boss has chosen to stay put and not care about the business," an industry insider said. With the linkage between tax and police, the tax bureau now has the bill of lading in hand, so even if the operating unit cannot be contacted, it does not matter. The tax police can directly contact the customs broker, and the cargo owner basically cannot escape.

As tax inspections deepen, various emergency notifications for customs declarations are coming one after another. One customs broker even issued a notice saying, "The company does not accept buying orders for customs declarations and does not make any authorizations. Please transition to formal customs declarations as soon as possible." Some service providers also said that customs are strictly inspecting steel products and reminded sellers not to participate in non-compliant behaviors such as buying orders and concealing reports to avoid losing out on big gains.

In this regard, many cross-border sellers claim that choosing to pay for exports is a helpless move, mainly because there are no input invoices. Some industry insiders have suggested that for the export of goods without invoices, you can choose 1039 individual business declaration export. At present, the country has designated pilot areas. As long as export sellers register as 1039 individual businesses in the pilot areas, they can enjoy the tax-free export policy without invoices.

In fact, the tax bureau is not only cracking down on export fraud, but also on fraudulent export tax rebates. It is not uncommon for some companies to obtain illegal profits through various means, but most of them end up suffering the consequences.

Previously, there were 32 cases in Guangdong Province alone , mainly involving dishonest behaviors such as defrauding export tax rebates and evading tax payments. Among them, 22 companies were transferred to judicial authorities, and 3 companies were involved in cases worth more than 100 million yuan. Among them, textile and clothing companies accounted for the largest proportion.

From the above cases, it is not difficult to see that the country is working hard to crack down on illegal activities. Especially since the official launch of the fourth phase of the Golden Tax System, all business and financial management of enterprises have been put on the table. It is particularly urgent for sellers to abide by the rules and act in compliance.

On the one hand, there are strict tax inspections by the country, and on the other hand, there are constant surprises on Membership Day. The psychological defenses of some sellers have been destroyed.

Prime Day kicks off, but there are constant surprises behind the boom in orders

In fact, many people did not have high expectations for this year's Membership Day, but it is obvious that most sellers' orders have ushered in a rain after a long drought in the first half of the year. On the first day of the promotion, some sellers said that they did not expect the effect of this year's promotion to be so good. There are many sellers whose orders have soared 10 times, and some sellers even said that they could not keep up with the inventory.

A seller gave his own summary: Although the sales volume is not as good as last year's Member Day, it is better than expected this year and there is room for profit. The first half of the year was terrible, and I didn't have high expectations for Member Day. I thought that the sales volume would be three or four times higher than usual. The result obviously exceeded expectations, and I hope to maintain such sales volume during the peak season at the end of the year.

This impressive record has undoubtedly poured cold water on sellers who frequently encountered problems during the promotion. Before the Member Day, a bug appeared in the countdown of the event, which caught the sellers off guard. Various problems followed one after another, and many sellers said it was difficult!

Before the promotion, the product was marked as "adult product" by Amazon. A seller revealed that one of his products with good sales ranking and rating data was marked as "adult product" before the promotion . He filed a case and submitted an appeal, but it was rejected. After multiple attempts, he was told that he could not participate in this Prime Day, and other discounts would not be affected. This situation is not an isolated case, and it also exists in pet products and household products.

Membership Day was followed by others. "I had originally planned to increase sales on Membership Day, but I never thought that I would be followed by others on the first day. The trademark I applied for is still in TM status. What should I do?" A seller complained. Many sellers have encountered such situations. Some sellers reported that their products were followed by others and their shopping carts were taken away, but the ads were still being placed. Some sellers' ASINs were followed by others on other sites, and the details page was modified, which triggered a dangerous goods review due to conflicting reviews.

Member Day has begun, but the goods are still on the way. As in previous years, many sellers this year still encountered warehouse overflows, and some goods failed to be delivered to the warehouse as scheduled, which directly affected the sellers' eligibility to participate in various promotional activities. Many sellers had to adopt a strategy of gradually raising prices to cope with the peak traffic of Member Day and strive to ensure that there is no shortage of goods.

Amazon suddenly issued a TRO for the lighting category . Sellers have reported receiving TRO emails from Amazon, mainly involving ring live broadcast lights, selfie lights, photography lights and other lighting-related products. Even the top sellers in this category were not spared and their accounts were frozen. Some sellers said that this was another industry earthquake caused by a rogue American law firm. At present, the products involved have been suspended from sale by Amazon, and the store funds have been frozen by the platform.

Tighten the review of UPC authenticity. At the juncture of Member Day, some sellers reported that their products were removed from the shelves because the UPC did not match the product. The platform requires sellers to provide relevant evidence for verification. If the sellers cannot provide it, the relevant products will not be able to be restored for sale. This also means that Amazon has tightened the review of UPC again, and sellers will miss the big promotion.

A large number of sellers received phishing emails. At the beginning of Member Day, Amazon's business manager issued an urgent reminder to all sellers that there were fraudulent emails that sent account deactivation warnings to sellers during the PD period, tricking sellers into clicking on links. Many sellers said that after clicking on the page, they found that it was indeed very similar to the official one, but there was no big difference.

During the annual promotion period, there are always various bugs or rectifications, so many sellers complain that Amazon has not become "mature" after so many years of membership days. For sellers, if they miss this promotion, the next surge in orders will be far away. After all, you don't know which will come first, the accident or the surge in orders.

Compared with the booming sales on Amazon, the situation of TEMU in the past two days is a bit disappointing. A TEMU seller lamented, "No orders today, probably because everyone went to Amazon Prime Day to shop." The victory is for others, and the misery is for oneself, how miserable.

Moreover, according to the sellers, TEMU has introduced a new bidding management method, where the same products can be bid together, and the bidding links are all your own, so if you are not careful, they will not be taken down. If you agree to the bidding, there will be no goods to ship, and if you do not agree to the bidding, you will be restricted from preparing goods and launching new products, which puts the sellers in a dilemma.

But this does not hinder TEMU's development overseas. So far in 2024, TEMU's downloads have continued to grow strongly. This year, TEMU has ranked first in iPhone App Store downloads for 72 days, including 13 consecutive days. Among Android free applications, TEMU also took the lead, ranking first in the Google Play Store for 85 days.

However, Amazon’s bugs and rectifications are not only found among SC sellers, but have also recently begun to rectify its “own sons”.

Amazon's big reorganization? Many Shenzhen VCs were liquidated

For a long time, VC accounts have been a love-hate relationship for countless sellers.

It has high weight and sales volume, and enjoys privileges such as multi-category operation, priority editing of product displays, priority access to shopping carts, and designated locations for advertising. It is nicknamed "Amazon's own son" by industry insiders, and a single account was once sold at a sky-high price of 2 million yuan.

Many big sellers have reached peak performance with the help of VC accounts. One of them is the small appliance giant Morning North Technology, which had a half-year revenue of US$223 million, of which US$190 million came from VC accounts. There are also small sellers that used to sell less than 20 orders a day, but after successfully switching to VC accounts, they now have nearly 300 orders a day.

The VC account is extremely popular at the moment, but as it becomes increasingly popular, the hidden concerns behind it are also gradually becoming apparent.

The privilege of being the son of a certain VC seller has become a sharp weapon for some VC sellers to stab their peers. They have been modifying seller links, adding inappropriate sensitive words, and randomly following sales. This situation has become more and more serious in recent years. Even though Amazon has banned some VC accounts, it has not had much effect.

It was only recently that Amazon really began to clean up its VC accounts.

According to sellers, since March this year, many VC sellers in Shenzhen have been liquidated by Amazon. Some have demanded compensation, with the amount of compensation being as high as 2 million US dollars; some VC accounts have been directly blocked due to fraud. An industry insider revealed that the VC accounts of several companies associated with a seller were blocked at the same time, and tens of millions of inventory were stuck in overseas warehouses.

This situation has become more common in recent times, with more and more sellers reporting that their VC accounts have been blocked and they cannot log in; their accounts are inactive and they are prompted to terminate the cooperation; they have directly received emails from Amazon stating that the cooperation will be terminated, which will take effect in 60 days (the monthly sales of such sellers are mostly between 200,000 and 600,000 US dollars); functions such as po, di, and df have been cancelled, etc.

This incident can be traced back to March this year, when a US Amazon product manager shared the message that "the listing was maliciously tampered with, with misunderstood language and adult information." This message later fermented among sellers and the media circles, attracting widespread attention. They focused the matter on the loophole in Amazon's VC account.

In their view, the black market transactions of VC on Amazon are becoming more and more rampant , with a large number of VC accounts being sold to Chinese sellers through the black market . Amazon should cancel the VC's editing rights on the Listing and recycle the abandoned VC , which will also put Amazon at the center of controversy.

Although Amazon did not respond to this at the time, it is understood that Amazon Seattle has begun discussing a secondary review of VC accounts. At the same time, VC accounts that violate regulations by tampering with listings or abusing VC functions will be immediately closed.

Moreover, Amazon's European VC accounts had a major cleanup in 2023, when the number of VC accounts in the market dropped sharply from more than 4,000 to about 1,000. Many people speculate that after Europe, the United States will also begin a similar cleanup.

It is not difficult to guess the reason why a large number of sellers have been liquidated recently. It is rumored that Amazon may ban more than 90% of VC accounts, among which those with annual GMV below 10 million US dollars are at the greatest risk. From another perspective, Amazon's move is to eliminate VC sellers with no strength. Most of these sellers are small in scale and abuse VC privileges. Or VC sellers who are not first-hand resources are mostly traders with less strength.

After this big cleanup, Amazon will keep real manufacturers and brands who have their own highlights, or have price advantages that can help Amazon deal with price wars on platforms such as TEMU; or have extremely strong brand power that can attract more consumers. These sellers tend to coexist with the platform and pursue more benefits, rather than challenging the platform rules.

Take Chenbei Technology as an example. It became an Amazon VC seller in 2017, and the VC account revenue reached US$233 million in 2020. In 2022, Chenbei Technology fully transformed into a VC seller, with VC revenue of US$190 million in the first half of the year. In 2023, the revenue was US$585 million, and the gross profit margin was as high as US$270 million.

Home furnishing giant Zhiou also has VC accounts, and their share has even shown an upward trend year by year. In 2021, the revenue of Zhiou VC account reached 558 million yuan, and the revenue of VC account in the first half of 2022 was much higher than the performance of Wayfair and offline B2B channels.

The two big sellers mentioned above are typical brands that Amazon wants to keep. According to peers, there are not many excellent VC sellers. Currently, there are less than 2,000 VC accounts in existence in the Chinese market, but there are probably 1,000 that are actually operating, and only a few dozen of them are operating well.

For sellers, having a VC account is just a "stepping stone". Establishing in-depth cooperation with VM (the purchasing manager who manages the VC account) is the key to the success of VC sellers. Generally speaking, only those with an annual income of more than 15 million US dollars will have a dedicated VM, who is responsible for regular communication and placing orders, and the order size is relatively stable.

Some sellers make a lot of money from VC accounts, but some sellers avoid them. Obviously, there is a polarization. In the future, with Amazon's rectification, what will be the trend of VC accounts?

Taxation

Member Day

VC Account