Many cross-border companies were exposed for tax evasion, with the amount reaching hundreds of millions of yuan!

After the joint meeting of eight national departments to combat tax-related crimes was held this year, the number of export tax rebate audits has increased significantly, and cross-border companies exposed to tax problems have also increased one after another. Recently, the industry has revealed that many companies have defrauded export tax rebates, with the amount involved reaching billions, and clothing, logistics and other companies have become the hardest hit areas for tax violations.

Many cross-border companies were exposed for tax fraud

For cross-border sellers, tax fraud is not uncommon, but the number of companies exposed for tax issues has increased significantly recently.

In Guangdong Province alone, there have been 32 cases recently , 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 involving amounts exceeding 100 million yuan. Among this batch of cases, textile and clothing companies accounted for the largest proportion, with as many as 20 companies involved.

Dongguan Kaiyang Import and Export Trading Co., Ltd. was involved in the highest amount of cases among the companies in this batch, nearly 200 million yuan. Due to tax law issues such as defrauding export tax rebates, the company was subject to administrative penalties of recovering 199.1343 million yuan in taxes, a fine of 1.3087 million yuan, and was transferred to the judicial authorities in accordance with the law.

However, the above cases are just the tip of the iceberg of tax problems. As we dig deeper, more violators are exposed. In a case recently announced by Shenzhen Economic Investigation, a cross-border clothing company had multiple tax problems: the person in charge repeatedly fabricated capital transaction flows of up to 2.2 billion yuan and issued false invoices of 180 million yuan over a period of ten years, and actually defrauded more than 19 million yuan in taxes.

After the tax fraud company was investigated, the related chain of false invoices, illegal freight forwarding declarations, underground banks, etc. were all uncovered. Relevant information shows that the people involved in the case were linked to two clothing companies in Guangzhou. On the surface, all kinds of export declaration materials were available, but one of the companies had no one working there and was a shell company that was mainly engaged in tax fraud.

The specific operation process of tax fraud is as follows: the freight forwarder sells the export information of the real owner of the goods to the person involved in the case → the person involved uses the name of the shell company as the header of the customs declaration → after the goods are successfully exported, the foreign currency is transferred to his own company account through underground banks as payment. The relevant tax refund invoices were also raised through illegal means and have been handed over to the judicial authorities for trial.

The same is true in the tax fraud case in March, where a company in Jiangsu used knockoff mobile phones to impersonate high-priced domestic mobile phones and defrauded 720 million yuan in export tax rebates over four years, shocking countless people. In fact, the same situation has occurred frequently recently, not only on the seller side, but also on the service provider side.

A service provider in Guangzhou defrauded more than 100 million yuan in taxes

In an announcement previously released by the State Administration of Taxation, Guangdong Shichen Logistics Co., Ltd. was identified as a major tax violation and dishonesty entity from 2018 to 2020 for suspected false invoices, fraudulent export tax rebates, and tax deductions, with the amount involved reaching 141 million yuan. If a logistics company gets into trouble, the sellers that work with it may also be implicated.

In fact, from the above cases, we can find that defrauding export tax rebates has been a frequent topic in the past two years. Some companies have obtained illegal profits through various means, but most of them have ended up suffering the consequences. However, according to feedback from some sellers in the industry, even normal tax rebates can easily be "backstabbed" by upstream and downstream chains.

"Export tax rebates are prone to problems. When the tax rebate is due after a year of approval, some suppliers may close down. There is no way to prove their production capacity, which puts us in a passive position," said a seller. Moreover, if there is a problem with the supplier's supplier, the seller may also be held responsible for not being able to get a tax rebate. Some sellers even have to be wary of the goods being taken away by freight forwarders for distribution and tax deception by using distribution invoices.

In addition to export tax rebates, false invoices and false invoices in other places are also the reasons why some sellers accidentally fall into the "tax law vortex". One seller said frankly: "When doing second-hand audits on Amazon, remember not to ask service providers to issue invoices. It is the easiest to get into trouble. Don't ask. If you ask, you will be hurt."

In addition, various places have been strictly checking taxes recently. According to feedback from industry insiders, many cross-border companies in Guangdong have been issued relevant notices recently, requiring them to check taxes and explain that the company has a large number of transportation invoices but has not recorded them in the accounts, or there is no matching export income, etc. Relevant sellers should be careful.

The editor learned that there are many situations that will be included in the verification scope in export declarations, such as abnormal growth in export revenue declaration compared with last year, but there is no reasonable reason; export revenue increases, but costs do not increase synchronously; there are abnormalities in the purchase invoices; there are no corresponding water, electricity and rental invoices, etc.

The EU has issued a fine of over 100 million yuan to crack down on tax evasion

The severity of tax crackdowns abroad is not only in China, but also should not be underestimated. Recently, the European Union Prosecutor's Office announced a bicycle tax evasion case. In order to circumvent the anti-dumping tax on bicycles, a French company disassembled the whole electric bicycle into parts and imported them. In the end, it was required to pay the goods tax and tariffs, and the relevant personnel were sentenced to several years in prison and fined more than 100 million yuan.

Looking back at this case, we can find that in February this year, the European Office for Combating Financial Abuses (OLAF) seized more than 20,000 bicycles imported from China to Poland. Case data showed that they took advantage of loopholes in the exemption policy (CP42) of the EU import mechanism and evaded the payment of VAT through false declarations. According to industry insiders, this batch of goods can evade at least 8 million euros in anti-dumping and countervailing duties and 4 million euros in VAT.

This EU case is also reminding relevant sellers to pay attention to the law and not to lose sight of the small for the sake of the big. As we all know, China is the world's largest exporter of two-wheeled electric vehicles and is highly active internationally. Under the influence of strict foreign emission standards and the advocacy of green travel, the demand for the E-bike market has always been high abroad, and many Chinese sellers have made a lot of money abroad.

As the weather has improved recently, the search popularity of E-bike has continued to rise. The searches for e-bike dreirad senioren and Electric bicycle battery have increased by 550% and 180% respectively.

Although the popularity continues to rise, this business is not easy to make money. On the one hand, most electric bicycles are lithium battery goods, which have extremely high requirements for export customs declaration and sea transportation. On the other hand, since 2019, the EU has imposed tariffs of 18.8% to 79.3% on Chinese electric bicycles, but many companies will circumvent tariffs in various ways to maintain their competitiveness, which leads to the above situation.

Today, the EU is stepping up its efforts to rectify tax issues, so sellers should not take chances. If they want to develop in overseas markets for a long time, they should abide by laws and trade rules.

Tax Refund

Cross-border

clothing