With losses exceeding 100 million yuan and its subsidiary going bankrupt and liquidated, the well-known retailer suffered a tragic defeat!

At the end of the year, the tax bureau caught the sellers off guard. Sellers on multiple sites reported receiving tax refund emails, which clearly required sellers to pay the taxes and late fees, otherwise the store would face the risk of being fined by the tax bureau and closed. Currently, the incident has been fermenting ...

Shenzhen's largest seller Xinghui shares was also found to need to pay back taxes. After being pursued by tax authorities in France, Germany, the United States and other countries, Xinghui shares were again pursued for taxes of up to 50 million yuan. To make matters worse, tax problems continued, and the company's performance was not much better. The report card of huge losses in 2023 was very disappointing, and the subsidiary was also going into bankruptcy liquidation.

Xinghui shares were forced to pay nearly 50 million in taxes

The tax department has stepped up the tracing of taxes paid by Amazon sellers. Because the authenticity of local accounts does not meet the requirements of local companies of EU companies, some sellers have gone bankrupt, including Zebao's parent company Xinghui Shares.

According to the announcement released by Xinghui Co., Ltd. on January 31, the company received a tax payment notice from the Italian tax department. Its subsidiary SKL failed to pay VAT in full from 2017 to 2021. The total taxes and fines now amount to 6.4245 million euros (equivalent to approximately RMB 49.56 million).

This is not the first time that Xinghui Co., Ltd. has received a tax payment notice.

On January 11, 2024, STK received a tax payment notice from the U.S. tax department, stating that it had failed to pay full taxes from 2016 to 2021. The total amount of taxes and fines was US$2.3784 million (equivalent to approximately RMB 17 million at the time).

Combined with the two most recent tax payments, in less than a month, the total amount that Xinghui Co., Ltd. needs to pay is more than RMB 60 million.

When mentioning this tax, we have to mention two key companies in the case, SKL and STK. SKL, which is mainly responsible for the procurement of the e-commerce sector and the registration and operation of Amazon stores, is a subsidiary established by Zebao in Hong Kong and is currently involved in disputes such as overdue payments; STK, Zebao's local account in the United States, is located in California, USA, and is also responsible for Amazon's online business.

It is worth noting that these two taxes involve the closing date of the merger between Zebao and Xinghui ( asset closing was completed on December 31, 2018) and the bet period (2018-2020). Assuming that the profit of Zebao is deducted from the 60 million yuan, and the profit does not reach the bet target, Zebao needs to compensate the relevant parties.

Xinghui shares also made it clear in the announcement that they would seek compensation from the relevant responsible parties in accordance with the relevant provisions of the "Asset Purchase Agreement" and other agreements. In other words, they would require Zebao to compensate for the taxes and fines before the delivery date and the losses incurred during the performance betting period. However, whether Xinghui shares can recover the losses and how much they can recover is still unknown.

At the same time, Xinghui Co., Ltd. took the lead in distancing itself from its subsidiary, claiming that SKL was not a major subsidiary and accounted for a low proportion of revenue, only 0.48% in the first three quarters of 2023, reaching 5.9563 million yuan, which would not affect the company's performance.

But is this really the case? The tax evasion incident has undoubtedly made things worse for Xinghui Shares, which is trying to save itself.

In 2023, Xinghui shares expects a net profit loss of more than 50 million

According to the performance forecast issued by Xinghui Shares, the company expects a net loss of 52 million to 66 million yuan in 2023, compared with a loss of 260 million yuan in the same period last year. On a quarterly basis, the company made a profit in the first quarter, but lost more than 20 million yuan in the third quarter, dragging down its overall performance.

Judging from the book data, Xinghui Co., Ltd.'s self-rescue seems to have begun to show results. The company has reduced its profit losses by adjusting its product structure, reducing costs and increasing efficiency. This can be seen in its financial report. The company's sales, administrative expenses and other expenditures are decreasing, by 175 million yuan and 27 million yuan respectively.

But this is the third consecutive year that Xinghui shares have suffered losses. Since 2021, Xinghui shares' revenue has been declining. The revenue in 2021 and 2022 both fell by more than 30%, to 3.66 billion yuan and 2.351 billion yuan respectively, and the net profit was -1.524 billion yuan and -260 million yuan respectively.

It can be said that although there has been an improvement, the root cause has not changed. This is inseparable from the incident with Zebao. Since mid-2021, Zebao was hit hard by Amazon's account ban, and its performance began to decline. From the halving of revenue in 2021 to 2.5 billion, and then to the 2022 year-on-year decline of more than 80%, Zebao's performance has almost reached a terrible point.

At the same time, Xinghui shares are also caught in the vortex of litigation and arbitration. According to Qichacha data, it is involved in as many as 139 legal lawsuits. In its company announcement, as of December 25, 2023, the company's cumulative litigation and arbitration matters for 12 consecutive months involved a total amount of RMB 21.0585 million, accounting for 13.71% of the latest audited net assets.

The mess that Xinghui Co., Ltd. is facing is inseparable from the "undercurrents" in its subsidiaries.

Xinghui Holdings' subsidiary was filed for bankruptcy liquidation

In addition to STK and SKL mentioned in the previous article, Xinghui Holdings also has a subsidiary called Linyoutong.

Recently, Shenzhen Maice Technology Co., Ltd. filed a bankruptcy liquidation application for Shenzhen Linyoutong Technology Development Co., Ltd. (hereinafter referred to as "Shenzhen Linyoutong"), a subsidiary of Xinghui Holdings. After entering the bankruptcy procedure, if the court appoints an administrator to take over Shenzhen Linyoutong, Xinghui Holdings will lose control of it, and its revenue will no longer be included in the company's consolidated financial statements.

Although Xinghui Co., Ltd. stated that Linyoutong’s revenue in the first three quarters of 2023 was only 53,700 yuan, accounting for 0.0043% of the company’s revenue, and would not have a significant impact on the company’s revenue, it is undeniable that Linyoutong was placed in an extremely important position before this.

It is understood that Linyoutong is the domestic purchasing entity of Zebao, that is, Linyoutong purchases qualified products in China, then sells the products to subsidiaries in the United States and other regions, and sells them on Amazon through Zebao's overseas subsidiaries. However, perhaps affected by the Zebao incident, Linyoutong has economic contract disputes with suppliers such as Yafu Electronics and Cooper Electronics.

In summary, almost all the subsidiaries with problems are related to Zebao. Linyoutong is the domestic purchasing entity of Zebao; SKL is established in Hong Kong and is responsible for Zebao's purchasing and Amazon online sales; STK is a local store in the United States and is responsible for Zebao's Amazon online sales. If Zebao gets into trouble, it can be said that the whole body will be affected.

At present, Zebao's situation is not optimistic. According to Qichacha data, Zebao is currently involved in more than 60 related legal proceedings, including sales contract disputes, and because its registered residence or business premises cannot be contacted, Zebao has also been listed as an enterprise with abnormal operations.

The trend of a best-selling generation is regrettable.

Xinghui Shares

Zebao

Taxation