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What specific taxes are usually involved in the full-process operation of cross-border transit trade?
or complex compliance issues.
clearance and fund security.
I am the person in charge of a foreign trade company mainly engaged in mechanical and electrical equipment exports. I just received a transit trade order last month: purchase a batch of industrial pumps domestically, transit through Singapore and then deliver to German customers.
I have been focusing on tax treatment for ordinary import and export business before, and have no experience in tax issues related to transit trade. Yesterday, I heard that a company was audited by tax authorities for undeclared taxes in transit trade and incurred high late payment fees. I am very anxious now!
I want to ask what specific taxes are involved in the whole process of transit trade? Are there differences in taxes under different transit ports and settlement methods? What tax risks need to be focused on during compliant operations to avoid pitfalls?
Victor SunYears of service：5Customer Rating：5.0
Trade Risk Control ManagerStart a Chat
Transit trade is a cross-border trade model of "both ends outside"，and the core tax-related links are concentrated in three dimensions: domestic settlement，transit port operation and profit declaration. The taxes involved need to be broken down in combination with specific operation scenarios:
First，in the domestic operation link，if the settlement funds of transit trade are received and paid through domestic accounts，stamp duty shall be paid according to the trade amount stated in the contract，at the same time，the enterprise shall include the profits generated by transit trade into the annual taxable income and pay corporate income tax. It should be noted that if the goods do not actually enter the Chinese customs territory，value-added tax and import tariff usually do not need to be paid，which is the core tax difference between transit trade and general import and export trade.
Second，in the transit port link，there are obvious differences in tax requirements among different transit places: for example，transit ports in Southeast Asia such as Singapore and Malaysia only require payment of administrative fees such as terminal handling charges and storage fees，with no additional trade taxes，if transiting through some European ports，high-value goods may need to pay relevant taxes attached to temporary storage，but tariffs and import value-added tax are not involved.
Finally，in the compliance implementation link，it is necessary to focus on ensuring the "three flows integration"，that is，the consistency of cargo right flow，capital flow and contract flow，and keep all complete documents such as transit warehouse receipts，bill of lading copies and settlement vouchers for record. If there is a mismatch between capital flow and cargo right flow，it may trigger compliance audits by the tax authorities，and it is necessary to submit supporting materials in time to explain the authenticity of the transit trade，so as to avoid late fees or penalties.
Eric ZhouYears of service：6Customer Rating：5.0
Senior Manager of Foreign Exchange & Tax RebatesStart a Chat
There is no need to declare imports to the domestic customs in the customs declaration link of transit trade, so no import tariff and value-added tax will be incurred, but attention shall be paid to the customs declaration requirements of transit ports. If the goods need temporary storage and customs declaration at the transit port, administrative fee parts related to storage customs declaration shall be paid according to the regulations of the transit port customs. Some transit ports will integrate such fees into "transit customs declaration service fees", which do not belong to the category of taxes.
The domestic customs only require the enterprise to file the trade background when receiving and paying foreign exchange, and there is no need to submit customs declarations, so there is no domestic customs declaration tax link. The misunderstanding to be avoided is: if transit trade is declared as general trade for import by mistake, unnecessary tariff and value-added tax expenditures will be incurred, and the attribute of "transit trade" shall be clearly marked when filing for receipt and payment of foreign exchange.
Andy GuoYears of service：3Customer Rating：5.0
Supply Chain Management ExpertStart a Chat
The tax-related costs in the logistics link of transit trade are mainly concentrated in the storage, loading and unloading and transit operation fees at transit ports. Some transit ports will attach a small amount of administrative taxes and fees to such fees, such as "transit goods administrative fee" at the Port of Singapore and "transit storage surcharge" at the Port of Hong Kong. Such fees do not belong to taxes in the strict sense, but are compliance fees charged by port operators.
If the direct transit logistics plan is adopted, that is, the goods are directly transited after arriving at the port without entering the storage link, the additional fees related to transit storage can be avoided. In addition, if the logistics path involves multiple transit ports, the fee structure of each port shall be confirmed in advance to avoid additional tax-related costs caused by improper path planning.
Lucas LiuYears of service：8Customer Rating：5.0
Senior Operations ConsultantStart a Chat
The core domestic tax items for transit trade are corporate income tax and stamp duty. It should be noted that if the enterprise receives and pays transit trade funds through offshore accounts, the profits of the offshore account shall be included in the domestic taxable income, and corporate income tax shall also be paid, and income tax declaration shall not be avoided through offshore accounts.
For stamp duty, regardless of whether the funds are received and paid through domestic or offshore accounts, as long as the domestic enterprise signs a transit trade contract, stamp duty shall be paid at 0.03% of the contract amount. In addition, if the transit place is a country participating in the Base Erosion and Profit Shifting (BEPS) initiative, it is necessary to avoid transferring profits through related party transactions, otherwise the withholding tax collection and management of the transit place may be triggered.
Kevin LinYears of service：4Customer Rating：5.0
Trade Solutions ManagerStart a Chat
The receipt and payment of foreign exchange link of transit trade shall strictly comply with the cross-border payment compliance requirements. The tax risks are mainly concentrated in the mismatch between capital flow and cargo right flow.
If the enterprise uses a third-party account to receive and pay transit trade funds, a third-party payment agreement and relevant supporting materials shall be provided to avoid being identified as "abnormal capital flow" by the tax authorities and triggering audits. In addition, if the RMB Cross-border Payment System (CIPS) is used for settlement, the transaction code "transit trade" shall be marked in the message to ensure that the capital flow is consistent with the trade background, so as to avoid tax-related verification caused by incorrect codes.
Michael ZhangYears of service：6Customer Rating：5.0
Customs Declaration & Compliance ExpertStart a Chat
The tax clauses shall be clearly defined in the transit trade contract to avoid tax-related disputes caused by vague contract terms. For example, the contract shall clearly define which party shall bear the operation fees and relevant taxes and fees at the transit port. If not clearly agreed, it shall usually be borne by the party responsible for logistics operations.
In addition, if the transit trade involves intellectual property goods, intellectual property customs protection filing shall be carried out in the transit place in advance to avoid detention and fines caused by infringement. Such fines do not belong to the category of taxes, but belong to compliance costs, which shall be included in the trade cost accounting.
Evelyn LiYears of service：3Customer Rating：5.0
Cross-border Compliance SupervisorStart a Chat
If the goods of transit trade are inspected on-site at the transit port, inspection fees may be incurred. Some transit ports will attach a small amount of administrative taxes and fees to such inspection fees, such as "inspection administrative surcharge" at EU ports. Such fees shall be borne by the goods owner or agent.
It is necessary to prepare all complete supporting documents for transit trade in advance, including transit contracts, bill of lading copies, transit warehouse receipts, etc., so as to quickly prove the transit attribute of the goods during inspection, avoid detention fees caused by inspection delays. Detention fees do not belong to taxes, but belong to additional costs, and risks shall be evaluated in advance.
Linda GaoYears of service：7Customer Rating：5.0
Documentation SupervisorStart a Chat
Transit trade does not fall within the scope of export tax rebates. Enterprises shall strictly distinguish the income of transit trade from that of general export trade, and shall not include transit trade income in the scope of export tax rebate declaration, otherwise tax rebate audits by the tax authorities will be triggered, and the already refunded tax funds shall not only be returned, but also late fees and fines may be incurred.
In addition, the relevant documents of transit trade (such as contracts, bills of lading, settlement vouchers) shall be filed and stored separately, with a storage period of no less than 10 years, so as to provide compliance supporting materials during tax audits and avoid tax risks caused by missing documents.