Recently, Chinese tax authorities have ordered a variety of large ecommerce companies and platforms to submit sales data for some Chinese merchants. This includes Ecommerce giants like Amazon, AliExpress, Temu, and Shein.
This is the first time the State Tax Administration has requested sales data from these companies, and it was done to reduce tax evasion and the underreporting of sales by some sellers.
The Motivation is to Reduce Tax Evasion and False Sales Reporting
China is requesting this information from ecommerce giants in hopes of cracking down on tax evasion by merchants using these platforms for international business, and the practice of sellers underreporting their earnings. Specifically, Chinese tax authorities are requesting that these platforms submit the third-quarter revenue for some sellers.
Access to this information allows Chinese regulators to better understand the real sales figures of these merchants, some of whom report sales that are much lower than actual sales, in an effort to pay less in taxes.
Amazon began sharing data back in mid-October, and other platforms like AliExpress, Temu, and Shein have also been submitting sales data as instructed. However, it’s important to keep in mind that none of the platforms has been accused of any wrongdoing.
Understanding Chinese Tax Laws for Merchants
According to Chinese tax laws, companies that have annual sales of over 5 million yuan (which is just over $703,000 USD) can face value-added tax rates up to 13%. Companies may be exempt from this tax if they provide certain export and customs clearance documents, but many merchants don’t have this documentation and thus are responsible for paying the tax.
Chinese Sellers Make Up a Majority of Amazon Sellers
This request is a major move in the industry, as Chinese sellers make up a huge portion of the merchants on major ecommerce platforms. In fact, according to Marketplace Pulse, Chinese sellers now make up 50.03% of Amazon’s global active seller base.
Not only that, but Chinese merchants make up 62.3% of new seller registrations on Amazon as of 2024, up from 7.1% in 2015.
The long-term fallout of this move by Chinese tax authorities remains to be seen, but several online sellers have already reported that they’ve received messages from local tax authorities demanding payment of these back taxes.
These tax bills that companies haven’t planned for have the potential to not only significantly hurt profit margins for these sellers, but also make it hard to operate at all.
Depending on the reach and outcome of this request, some Chinese sellers who ship products globally may need to rethink their pricing strategy to ensure they’re prepared for the additional tax burden, while still staying competitive within international markets.
