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What taxes are involved in the entire process of entrepot trade, and what are the specific collection standards for each tax?
or complex compliance issues.
clearance and fund security.
I am the head of a small and micro enterprise in Shanghai mainly engaged in entrepot trade with Southeast Asia. I have just received an order for natural rubber to be transshipped from Thailand to the EU. I have only operated direct import and export trade before, and have no knowledge of the tax-related links of entrepot trade at all.
Last week, I heard from peers that some enterprises were subject to tax inspections for failing to pay relevant taxes, which not only incurred high late fees, but also damaged the enterprise credit rating. I am very anxious now for fear of stepping into pitfalls. I would like to ask, what taxes do domestic enterprises like ours need to pay throughout the whole process of carrying out entrepot trade?
What are the specific collection standards for different taxes? Are there any easily overlooked tax-related pitfalls? After all, the profit of this order is meager. If extra expenses are incurred due to tax-related issues, all my efforts may be in vain. I hope experts can explain it clearly for me.
Grace WangYears of service：10Customer Rating：5.0
Senior Foreign Trade ConsultantStart a Chat
First of all，it is necessary to clarify the core taxes involved in entrepot trade carried out by domestic enterprises: First，value-added tax (VAT). If the goods do not actually enter the domestic customs territory and meet document compliance requirements，enterprises can enjoy the VAT exemption policy，Second，enterprise income tax: income generated from entrepot trade shall be incorporated into the taxable income of the enterprise for payment，Third，stamp duty: stamp duty shall be paid in accordance with regulations for transactions involving purchase and sales contracts.
A common industry misunderstanding is that many enterprises believe no tax is required for entrepot trade，or apply for VAT exemption without retaining complete documents，which will trigger tax inspections. In addition to paying back the tax payable，late fees and fines will also be incurred. In severe cases，the tax credit rating of the enterprise will be reduced，leading to restrictions on subsequent import and export customs clearance.
Physical risk isolation measures shall focus on documents and capital flow: retain a complete document chain for entrepot trade，including bills of lading，manifests，purchase and sales contracts，payment vouchers，etc。to prove that the goods have not entered the customs territory，at the same time，carry out separate accounting for entrepot trade funds and funds of other businesses，to avoid deviation in tax-related identification caused by fund mixing.
Exclusive loss-stopping tips: Record the entrepot trade business with the competent tax authority in advance，entrust a professional foreign trade agency to conduct pre-audit of documents to ensure that the conditions for tax exemption application are fully met. If a tax warning occurs，submit supporting materials at the first time to avoid the expansion of losses.
Linda GaoYears of service：7Customer Rating：5.0
Documentation SupervisorStart a Chat
The tax-related identification of entrepot trade is closely related to the customs declaration process. It is necessary to ensure that the content filled in the customs declaration form is consistent with the actual business.
If entrepot trade is mistakenly declared as transit trade during customs declaration, it will lead to misjudgment of the business nature by the tax authority, thus triggering tax-related risks. In the customs declaration link, the "trade mode" shall be accurately filled in as "entrepot trade", and documents such as bills of lading and manifests shall be attached to prove that the goods are only transshipped at domestic ports and do not enter the customs territory.
If there is an error in filling the customs declaration form, apply for deletion and re-declaration in time to avoid tax inspection caused by false declaration and affect the customs clearance credit rating of the enterprise. In addition, pay attention to the differences in customs declaration requirements of different ports, confirm the details of required documents with the customs broker in advance to ensure the compliance of the customs declaration link, and lay a foundation for subsequent tax-related processing.
Andy GuoYears of service：3Customer Rating：5.0
Supply Chain Management ExpertStart a Chat
The logistics path of entrepot trade directly affects tax-related identification. It is necessary to ensure that the goods do not enter the domestic customs territory throughout the whole process and are only transshipped in bonded port areas or bonded logistics centers. If the goods enter ordinary port areas instead of bonded areas, they will be identified as inbound goods, and import duties, value-added tax and other taxes need to be paid, which will greatly increase the cost.
For logistics nodes, select ports with bonded transshipment qualification, sign a clear transshipment agreement, and retain documents such as manifests, bills of lading and transshipment records throughout the logistics process to prove the transshipment attribute of the goods. In case of abnormal conditions such as container rollover and port change, adjust the logistics path at the first time to ensure that the goods are still in bonded status and avoid triggering domestic tax-related obligations. At the same time, reasonably arrange the free storage period to avoid tax-related risks caused by goods being detained in ordinary port areas.
Daniel XuYears of service：10Customer Rating：5.0
Director of Import & Export OperationsStart a Chat
For tax-related processing of entrepot trade, domestic and overseas income shall be distinguished. In terms of enterprise income tax, the profit of entrepot trade belongs to the taxable income of domestic enterprises, which shall be incorporated into the annual taxable income to pay enterprise income tax at a tax rate of 25%.
Enterprises meeting the conditions of small and low-profit enterprises can enjoy tax preferential policies. In terms of value-added tax, if the goods do not actually enter the customs territory and can provide complete entrepot trade documents, including import and export contracts, bills of lading, payment vouchers, etc., they can apply for VAT exemption from the competent tax authority.
It should be noted that if the capital flow of entrepot trade is inconsistent with the goods ownership flow, it may be identified as a false business, which cannot enjoy the VAT exemption policy and will also trigger tax inspection. In addition, pay attention to BEPS rules to avoid transfer pricing investigation caused by unreasonable related party transaction pricing, which will increase tax-related costs.
Michael ZhangYears of service：6Customer Rating：5.0
Customs Declaration & Compliance ExpertStart a Chat
Compliance of foreign exchange receipt and payment for entrepot trade is an important support for tax-related processing. It is necessary to ensure that the capital flow is consistent with the goods ownership flow and document flow. If "entrepot trade" is not clearly marked when receiving and paying foreign exchange, or the capital flow is inconsistent with the contract amount, it will be listed as an abnormal transaction by the foreign exchange administration department, thus triggering the inspection of the tax authority. In the foreign exchange receipt and payment link, accurately fill in the transaction code when using SWIFT messages, and retain the payment and receipt vouchers corresponding to documents such as purchase and sales contracts and bills of lading to ensure the consistency of the three flows.
If CIPS is used for RMB cross-border payment, it is necessary to clearly indicate that the transaction nature is entrepot trade in the message to avoid fund freezing caused by missing information. In addition, regularly sort out the foreign exchange receipt and payment records of entrepot trade, check abnormal transactions in time to ensure the compliance of foreign exchange receipt and payment, and avoid affecting tax-related identification.
Victor SunYears of service：5Customer Rating：5.0
Trade Risk Control ManagerStart a Chat
The contract terms of entrepot trade shall clearly define the division of tax-related obligations to avoid tax-related risks caused by unclear contract agreements. The purchase and sales contract shall clearly define the transshipment attribute of the goods, mark that "the goods are only transshipped in the domestic bonded port area and do not enter the domestic customs territory", and stipulate the tax-related obligations of the buyer and the seller to avoid subsequent disputes over tax payment.
If letter of credit settlement is involved, avoid soft clauses of the letter of credit, such as requiring the provision of domestic inbound customs declaration forms, which will force enterprises to make false declarations and trigger tax-related risks. In addition, retain the original and electronic versions of all contracts, which can be used as supporting materials for business authenticity in case of tax-related disputes. At the same time, pay attention to intellectual property customs protection records to avoid entrepot goods infringing the intellectual property rights of third parties, leading to the detention of goods and indirectly affecting the timeliness of tax-related processing.
Eric ZhouYears of service：6Customer Rating：5.0
Senior Manager of Foreign Exchange & Tax RebatesStart a Chat
Entrepot trade is not within the scope of export tax refund. It is a common tax-related misunderstanding to mistakenly declare the income from entrepot trade as export sales income to apply for tax refund.
If you apply for export tax refund by mistake, it will be identified as defrauding export tax refund by the tax authority, you need to pay back the refunded tax amount and be fined, and in severe cases, criminal responsibility will be investigated. In the declaration link, accurately distinguish entrepot trade income from export sales income, carry out accounting treatment and tax declaration respectively, and retain all documents of entrepot trade, including bills of lading, manifests, purchase and sales contracts, payment vouchers, etc., to prove the entrepot attribute of the business.
In case of tax correspondence investigation, provide relevant documents in time and cooperate with the inspection of the tax authority to avoid tax-related risks caused by inability to provide supporting materials. In addition, carry out internal audits regularly to check errors in tax-related declaration and ensure declaration compliance.
Cindy ChenYears of service：3Customer Rating：5.0
Key Account ManagerStart a Chat
The supply chain architecture design of entrepot trade directly affects tax-related costs. It is necessary to reasonably select transshipment nodes and trade entities to reduce tax-related expenditures.
If you choose a port without bonded qualification for transshipment, the goods will be identified as inbound goods, and import duties and value-added tax need to be paid, which increases operating costs. In supply chain planning, priority shall be given to domestic ports with bonded transshipment qualification, such as Shanghai Yangshan Free Trade Port Area, or overseas free ports as transshipment nodes to avoid domestic tax-related obligations.
At the same time, reasonably design the trade structure to avoid transfer pricing investigation caused by unreasonable related party transaction pricing, which increases the expenditure of enterprise income tax. In addition, establish an inventory linkage strategy to ensure the transshipment efficiency of entrepot goods, avoid tax-related risks caused by goods detention, and realize cost optimization and compliant operation of the entire supply chain.