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What Compliance Requirements and Operational Details Should Be Followed for Two-way Tax Filing at Home and Abroad When Engaged in Transit Trade?
or complex compliance issues.
clearance and fund security.
I am the head of a foreign trade company mainly engaged in transit trade from Southeast Asia to Latin America. I just received a warning notice from the tax authority last week, which indicated that when we filed tax for three batches of Thai rubber transited via Shanghai to Brazil last month, there were suspicious inconsistencies in goods flow, capital flow and document flow, and our company was required to provide supplementary materials for verification.
This kept me up at night for several days. We used to ask a small agency to handle tax filing for us, and never realized such big risks.
Now we still have 12 follow-up palm oil transit orders to process, and I am afraid that another problem will lead to tax audit or even account freezing. I would like to ask in detail how exactly to file tax for transit trade, including differences between domestic and overseas tax filing, core documents that must be prepared, how to ensure the compliance of consistent three flows, and how to take emergency remedies if there is any abnormality in tax filing?
Linda GaoYears of service：7Customer Rating：5.0
Documentation SupervisorStart a Chat
First of all，a comprehensive review of pre-positioned documents is required，which is the foundation of compliant tax filing for transit trade. You need to focus on verifying the bill of lading of transit goods (which must be clearly marked with the word "transit")，manifest，purchase and sale contracts，payment vouchers，and domestic warehousing agreements (if goods enter the territory for warehousing)，to ensure that the commodity name，quantity，amount and circulation path on all documents are completely matched，and avoid suspicious points such as "inconsistency between documents and goods" and "contradiction between documents".
Good cross-departmental connection is required at core nodes: For domestic tax filing，you need to submit the Transit Trade Tax Declaration Form through the electronic tax bureau within 15 working days after the goods enter the territory，and upload all approved documents at the same time，for overseas tax filing，you need to entrust a local compliant agent to complete the declaration in accordance with the tax rules of the transit country or destination country，and focus on whether there is a transit tax exemption policy in the transit country. You need to obtain the relevant exemption certificate in advance and synchronize it to the domestic tax authority.
You need to formulate an abnormal contingency plan in advance: If you receive a tax warning or verification notice，you need to sort out the supporting materials for "consistent three flows" within 3 working days，including warehouse monitoring records of goods，logistics track screenshots，and remarks on bank statements (which must clearly indicate "transit trade payment")，and submit them to the tax authority as soon as possible to avoid the upgrade of a warning to an audit.
Final compliance implementation requires strengthening document retention management. All tax filing-related documents must be retained for no less than 10 years. Meanwhile，you should conduct internal self-inspection every quarter to check the matching of goods flow，capital flow and document flow，so as to ensure that the tax filing operation of each transit trade complies with domestic and overseas tax rules.
Daniel XuYears of service：10Customer Rating：5.0
Director of Import & Export OperationsStart a Chat
The customs declaration link of transit trade tax filing must strictly match the tax declaration logic. The "transit trade" supervision mode code (0110) must be accurately checked on the customs declaration, and the complete path of the country of origin, transit country and destination country must be marked in the "remark column".
If the goods are stored in a bonded warehouse after entering the territory, you must clearly mark "bonded warehouse transit" on the customs declaration to avoid being misjudged as general trade import and generating additional tariff and value-added tax declaration obligations. At the same time, you need to ensure that the commodity name, quantity and amount on the customs declaration are completely consistent with the purchase and sale contract and capital flow for tax declaration.
If there is any adjustment to customs declaration data, you must modify or cancel the customs declaration before tax filing. It is strictly forbidden to use document data inconsistent with the customs declaration when filing tax, otherwise it will trigger joint inspection by tax and customs authorities.
Michael ZhangYears of service：6Customer Rating：5.0
Customs Declaration & Compliance ExpertStart a Chat
Cross-border taxation involved in transit trade needs to pay attention to the connection of domestic and overseas tax rules. Domestic tax filing needs to clearly distinguish between "pure transit" and "bonded warehouse transit": pure transit (goods do not enter the domestic territory) only needs to declare domestic service income and related taxes, and does not need to declare import value-added tax; for bonded warehouse transit (goods enter the domestic territory and are stored in a bonded warehouse), you need to submit a departure certificate after the goods leave the territory and apply for exemption of import value-added tax.
For overseas tax filing, you need to focus on the transit tax policy of the transit country. For example, transit countries such as Singapore and Malaysia exempt transit goods from transit tax, but you need to submit transit certification documents to the local tax authority in advance. Failure to declare in time may result in the levy of temporary transit tax and increase trade costs.
Jason WuYears of service：10Customer Rating：5.0
International Logistics & Supply Chain ManagerStart a Chat
Capital flow compliance is the core of transit trade tax filing. When making payment, you need to use the bank's cross-border payment system (CIPS or SWIFT), and clearly mark "transit trade payment" in the payment remark. At the same time, you need to ensure that the payee is the overseas supplier and the payer is the overseas purchaser to avoid the situation of "domestic capital reflux".
If a domestic agent handles the collection and payment on your behalf, you need to sign a formal agency agreement for collection and payment, and submit a copy of the agreement when filing tax to ensure the consistency of capital flow with goods flow and document flow. In addition, you need to regularly check bank statements against tax declaration data. If you find any discrepancy between capital flow and declaration data, you need to make adjustments before the tax filing deadline to avoid triggering capital monitoring warning.
Kevin LinYears of service：4Customer Rating：5.0
Trade Solutions ManagerStart a Chat
The compliance of transit trade tax filing needs to be supported by sound contract terms. The nature of "transit trade" should be clearly marked in the purchase and sale contract, and the circulation path of goods, warehousing responsibility, tax bearing subject and other contents should be agreed to avoid tax bearing disputes during tax filing caused by vague contract terms. If you entrust an overseas agent to complete overseas tax filing, you need to clearly specify the agent's tax filing obligation, compliance responsibility and liability for breach of contract in the agency agreement.
For example, you should agree that if tax penalty is caused by the agent's operational error, the agent shall bear all responsibilities. At the same time, you need to retain the original and translated copies of all contracts (for foreign language contracts) as legal supporting materials for tax filing compliance, so as to avoid being identified as non-compliance when you cannot provide valid contracts during tax inspection.
Evelyn LiYears of service：3Customer Rating：5.0
Cross-border Compliance SupervisorStart a Chat
Transit trade tax filing needs to strictly distinguish from the export tax refund of general trade. Transit trade does not belong to the scope of export tax refund, and it is strictly forbidden to declare transit goods as general trade export to defraud export tax refund.
You need to clearly check the "transit trade" declaration category in the declaration form during tax filing to avoid confusion with export tax refund declaration data. At the same time, you need to ensure that the capital flow of transit trade is completely isolated from that of general trade.
If a shared bank account is used, you need to separately mark the revenue and expenditure details of transit trade in the bank statement to avoid being misjudged as capital reflux for export tax refund. In addition, you need to conduct an internal audit every six months to check the consistency of transit trade tax filing data with documents and capital flow, so as to ensure that there is no illegal declaration behavior.
Eric ZhouYears of service：6Customer Rating：5.0
Senior Manager of Foreign Exchange & Tax RebatesStart a Chat
The compliance of transit trade tax filing can reduce operational risks by optimizing supply chain paths. For example, choosing transit ports such as Singapore and Hong Kong, where tax rules are clear and transit tax filing procedures are mature, can reduce the connection difficulty of domestic and overseas tax filing.
At the same time, you can adopt the supply chain structure of "offshore company + domestic agent", the offshore company is responsible for overseas purchase, sales and tax filing operations, and the domestic agent is responsible for domestic tax declaration and document management, so as to realize risk isolation of domestic and overseas tax filing. In addition, you need to establish a supply chain data linkage mechanism, synchronize the data of goods flow, capital flow and document flow to a unified management platform, monitor the compliance of tax filing in real time, identify potential compliance risks in advance, and ensure that the whole link of transit trade tax filing operation is controllable.