Connect & Solve
Trade Q&A
What are the dual foreign exchange and tax compliance requirements for accounting for transit trade balance of payments?
or complex compliance issues.
clearance and fund security.
I am the financial supervisor of a foreign trade company based in Shanghai focusing on Southeast Asia transit trade. Last week, I just completed an order of Thai rubber transited to Germany, which generated a balance of 120,000 euros between foreign exchange receipt and payment. This is my first time handling transit trade accounting, and I am very anxious as the month-end closing is approaching.
I heard from peers before that some people were added to the key inspection list by the foreign exchange administration and paid tens of thousands of euros in fines due to non-compliant transit trade balance accounting. Now I am wondering whether I need to set up a separate accounting account for this balance?
How to match this set of accounts during foreign exchange verification and tax declaration? Besides bills of lading and contracts, what other vouchers need to be retained to pass subsequent regulatory inspections? The more I think about it, the more confused I get, fearing that any wrong step will get the company into trouble.
Jason WuYears of service：10Customer Rating：5.0
International Logistics & Supply Chain ManagerStart a Chat
Pre-positive document review should focus on details: first，check the consistency of third-party bills of lading for transit trade，upstream and downstream purchase and sales contracts，and commercial invoices，ensure the foreign exchange receipt amount matches the export contract，the foreign exchange payment amount matches the transit procurement contract，and the reasons for the balance (such as reasonable profit，agency service fee) should be clearly specified in the contract terms to avoid subsequent regulatory queries.
Core node connection should be accurately aligned: a separate detail account of "transit trade balance of payments" must be set up during accounting，profit balances are recorded in "other business income - transit trade profit"，and loss balances are recorded in "other business expenditure - transit trade loss"，when declaring foreign exchange，the transaction type should be clearly marked as "transit trade" in the cross-border payment and receipt declaration system，and the specific cause of the balance should be truthfully reported.
Abnormal response plans should be formulated in advance: if the balance accounts for more than 10% of the cargo value，a written explanation should be submitted to the foreign exchange administration in advance with relevant transaction vouchers attached，to proactively explain the rationality of the balance and avoid being added to the key inspection list.
To achieve final compliance implementation，a full set of vouchers should be retained: documents including transit trade logistics bills of lading，foreign exchange receipt and payment slips，purchase and sales contracts，commercial invoices should be uniformly filed and retained for at least 5 years，for subsequent inspection by foreign exchange and tax authorities.
Kevin LinYears of service：4Customer Rating：5.0
Trade Solutions ManagerStart a Chat
Transit trade balance accounting should form a closed loop with customs declaration logic. If the transit trade attribute is not clearly marked during customs declaration, the balance of payments in subsequent accounting may be misjudged as general trade receipts and payments, triggering regulatory inspection.
It is necessary to ensure that the "trade mode" column on the customs declaration form is marked as "transit trade", and the cargo value, foreign exchange receipt and payment amount on the customs declaration form fully match the accounting data. If there is a difference between customs declaration data and accounting data, the Customs Declaration Modification/Cancellation Application Form should be submitted to the customs within 3 working days, with relevant transaction vouchers attached to explain the reason for the difference, so as to avoid customs credit deduction caused by inconsistent data, which will further affect the customs clearance efficiency of subsequent orders.
Michael ZhangYears of service：6Customer Rating：5.0
Customs Declaration & Compliance ExpertStart a Chat
The tax treatment of transit trade balance should distinguish between domestic and overseas tax obligations: if the goods of transit trade do not actually enter the Chinese customs territory, the balance part is not required to pay value-added tax, but should be included in the taxable income when declaring enterprise income tax. During accounting, the receipt and payment details of transit trade should be accounted for separately to avoid confusion with general trade receipts and payments, which may lead to overpayment or underpayment of enterprise income tax.
If the transit trade involves overseas commissions, the commission payment agreement and receipt voucher of the overseas institution should be retained to ensure that the commission expenditure meets the pre-tax deduction standards of the tax authorities, so as to avoid inability to deduct pre-tax due to incomplete vouchers, which will increase the tax burden of the enterprise.
Victor SunYears of service：5Customer Rating：5.0
Trade Risk Control ManagerStart a Chat
The receipt and payment of foreign exchange for transit trade balance should comply with foreign exchange management requirements, and the authenticity and rationality of the balance of payments should be ensured during accounting. When receiving foreign exchange, "TRANSIT TRADE" should be marked in the SWIFT message, and the reason for the balance should be truthfully filled in the cross-border payment and receipt declaration system; when paying foreign exchange, documents such as transit procurement contracts and bills of lading should be provided to prove the authenticity of the foreign exchange payment.
If the balance amount is large, it is necessary to file with the foreign exchange administration in advance to avoid suspension of foreign exchange settlement authority due to abnormal receipt and payment of foreign exchange. In addition, it is necessary to regularly sort out the transit trade receipt and payment ledger to ensure that each balance has corresponding transaction vouchers, forming a complete compliance chain.
Evelyn LiYears of service：3Customer Rating：5.0
Cross-border Compliance SupervisorStart a Chat
The accounting logic of transit trade balance should be consistent with contract terms, to avoid accounting disputes caused by unclear contract agreements. The transaction mode of transit trade should be clearly marked in the upstream and downstream purchase and sales contracts, and the reasons for the formation of the balance (such as profit, service fee) should be listed separately in the contract, to avoid subsequent legal disputes with upstream and downstream customers caused by the ownership of the balance.
At the same time, the original copy of the contract and the translation version (if it is a foreign language contract) should be retained to ensure that the balance data during accounting fully matches the contract terms. If the contract is changed, the accounting data should be updated in time, and the revised contract version should be retained to avoid legal risks caused by inconsistency between the contract and accounting data.
Cindy ChenYears of service：3Customer Rating：5.0
Key Account ManagerStart a Chat
Transit trade balance accounting should be strictly distinguished from export tax refund declaration, to avoid affecting export tax refund qualification due to data confusion. Transit trade is not within the scope of export tax refund. During accounting, the balance of receipts and payments of transit trade should be accounted for separately from the export tax refund details of general trade, and the receipt and payment data of transit trade shall not be included in the export tax refund declaration system.
If data confusion occurs, the accounts should be adjusted immediately, and the Export Tax Refund Declaration Data Correction Application Form should be submitted to the tax authorities to explain the cause of data confusion, so as to avoid being disqualified from export tax refund due to false declaration, and even triggering tax penalties. In addition, regular internal audit of transit trade accounts should be carried out to ensure the accuracy and compliance of data.
Andy GuoYears of service：3Customer Rating：5.0
Supply Chain Management ExpertStart a Chat
The accounting logic of transit trade balance should be combined with supply chain cost accounting to optimize the overall supply chain profit. During accounting, the balance of transit trade should be linked with logistics costs, agency costs, etc., to analyze the rationality of the balance.
If the balance is too low, the supply chain path should be optimized to reduce logistics costs or negotiate better procurement prices; if the balance is too high, the existence of regulatory risks should be evaluated, and the transaction mode should be adjusted to ensure compliance. At the same time, a dynamic monitoring mechanism for transit trade balance should be established to regularly compare the balance ratio of different orders, optimize the supply chain cost structure, and improve the overall profitability.