A new round of crackdown! A group of sellers have been closed down

During the peak season, platforms such as Amazon launched another round of major censorship.

As we all know, since Europe's strict tax investigation, the costs of related cross-border sellers have skyrocketed instantly, and European local accounts have taken advantage of the trend. In the past two years, they have been hyped up and a large number of sellers have been tempted to register. With the latest round of strict investigations, a number of sellers have also received store closure notices one after another.

In addition, the European Administrative Cooperation Directive (DAC7) has also officially come into effect, further regulating the tax compliance issues of cross-border sellers.

One seller has listed nearly 10 accounts! European accounts are being strictly investigated

The previously popular European local accounts are "cooling down". Recently, many cross-border sellers have reported that their European local accounts have been checked one after another. The platform detailed that the company information recorded by the sellers in the local trade registration office was found to be abnormal and they needed to provide relevant information for review. Many sellers' accounts have been blocked:

I just bought two UK local accounts , and after changing my credit card , I was told that my account was down a few days later.

The UK and Ireland accounts were down, some showed BAP , some showed association ;

The BAP review was triggered , and there was no response to the email submitted ;

The account that I bought with money was gone before it even started to make money, so I lost both the wife and the army .

…

Judging from the overall feedback, many of these problematic accounts are old accounts that have been in operation for a long time, and their sales are not low. One of the sellers detailed that nearly 10 of his local European accounts were blocked one after another, with an overall annual sales of tens of millions. Since the account was blocked too suddenly, it was considered that they missed the peak season, but they had already prepared a lot of goods for the peak season... This means that if the account cannot be saved in the end, the seller's loss will naturally be heavy.

Some sellers also expressed confusion, saying that they suddenly received a performance notification from Amazon, indicating that their funds were frozen. Their accounts were purely registered local European accounts, and there was no change of address.

A phenomenon that cannot be ignored is that many blocked accounts have more or less some problems, such as problems with registration information and indeed tax violations. It can be predicted that the success rate of appeals is extremely low. Currently, many sellers who have been affected have stated that they will abandon the problematic accounts because the cost of paying the taxes is very high, and they may even end up working for nothing for a year and still end up losing money.

There are many speculations among industry insiders about the reasons for this large-scale account blocking. A commonly mentioned point of view is that relevant departments and e-commerce platforms should strictly investigate sellers' tax evasion and tax avoidance.

It is understood that many cross-border sellers have registered too many European local accounts to avoid taxes. This number has far exceeded the number originally limited by the platform, which attracted the attention of the platform and subsequently took a series of evasion measures.

One important point is to limit the issuance of investment links to European local stores. An Amazon investment manager said that they recently received an emergency notice internally that all European local stores have stopped issuing links and the resumption time is to be determined.

In addition, Amazon's registration system has been upgraded, increasing the difficulty of registration and focusing on controlling the mobile phone number link. The mobile phone number bound when registering a local account needs to correspond to the country and region, otherwise the verification code cannot be received.

DAC7 has come into effect! Are European local accounts still advantageous?

As we all know, European local accounts can enjoy better policies and tax benefits. For example, British local accounts have a tax-free quota of 85,000 yuan , and sales of 85,000-150,000 yuan are subject to the policy benefits of low tax rates . In this way, the products sold by relevant sellers have greater room for price reduction and price advantages, with lower costs and higher profits, resulting in the high popularity of local accounts in the past two years. However, the DAC7 that has already taken effect has weakened the advantages of European local accounts.

DAC7 is a European Union ( EU ) directive requiring online marketplaces within the EU (such as Amazon , eBay, etc. ) to collect, verify and report VAT or tax data and financial data of sales partners residing in the EU (regardless of which marketplace they sell their products on) .

To comply with Article 7 of the Administrative Cooperation Directive , platforms must :

1. Collect additional information about sales partners located in the EU, such as taxpayer identification number (TIN) and permanent establishment ;

2. Verify the above information in the database of the relevant agency ;

3. Report sales partners’ financial transactions, fees, payments, bank details, and due diligence data to EU tax authorities .

Platforms such as Amazon are obliged to deactivate non-compliant marketplace accounts until the sellers provide this information and it is verified in the database of the relevant agency .

According to the policy announcement, sellers who meet any of the following conditions are required to conduct "DAC7" instruction verification:

1. The European site store registration uses an EU company ;

2. Sales from January 2023 to now have reached 2,000 euros or more ;

3. Completed 30 or more order transactions from January 2023 to now .

Industry insiders said that DAC7 can be interpreted as a new directive to fill tax loopholes. Those problematic European local accounts will be cleared out one after another. Those formally registered European local accounts will naturally have no problems, but even so, compliance declarations must be made. It is best to take remedial measures for previous non-compliant behaviors.

The cost of non-compliance is high, and the compliance cost in the European market is high!

In fact, the issue of European local accounts being blocked has been mentioned frequently in recent years, and several large-scale account blocking incidents have occurred this year alone.

In the middle of this year, many sellers said that Chinese legal persons’ European local accounts were strictly checked. People familiar with the matter said that Amazon restricted and strictly reviewed the information of Chinese legal persons with European local accounts such as UK and FR, especially KYC, which also affected the KYC review speed of new accounts.

A seller who was scammed said that local European accounts can indeed increase product profits, but this year, the policy tightening has been clearly felt , and the local accounts purchased have been encountering problems, such as KYC review, tax audit, etc. Formal local accounts are naturally risk-free, while irregular local accounts are like " three-no" products. Once they encounter an audit, they are basically "done" .

Under round after round of strict inspections, a number of sellers have lost their enthusiasm for local European accounts and joined the ranks of compliant operations, which is also the key to the sellers' long-term strategy.

It is understood that the European market has always been an important battlefield for cross-border e-commerce sellers, and it can also be said to be one of the markets with the highest compliance costs. If sellers want to continue in Europe for a long time, they must keep abreast of the trend of European tax reforms and take compliance measures. All loopholes that can take shortcuts will eventually be blocked due to compliance issues. It is indeed a bit nice to make quick money for a while, but in the end, you may have to pay a higher price.