China targets tax evasion by sellers on e-commerce sites

Based on China’s tax laws, companies with annual sales of more than 5 million yuan (around $703,000) need to pay up to 13% in VAT

Chinese tax authorities ordered e-commerce giants including Amazon.com Inc. to hand over sales data for the first time, according to people familiar with the matter, in a rare move to crack down on tax evasion by merchants who use the online platforms for cross-border business.

Amazon started sharing data in mid-October, while China-origin competitors including Alibaba Group Holding Ltd.’s AliExpress, Temu and Shein Group Ltd. handed it over after being asked weeks earlier, the people said. Tax authorities are not accusing the platforms themselves of any wrongdoing.

The data has given Chinese regulators a more accurate picture of online exporters’ sales, which are often far higher than the figures they report to tax bureaus, the people added. If they amend filings to match platform data, sellers could face as much as 13% in value-added taxes plus corporate levies, the people said, with back taxes wiping out profit margins.

Based on China’s tax laws, companies with annual sales of more than 5 million yuan (around $703,000) need to pay up to 13% in VAT. Merchants are exempt from the levy only if they can provide customs clearance documents and other proof of export — which most online sellers struggle to do under their current business structure.

Chinese sellers now make up just more than half of Amazon’s global active seller base — their first time crossing the 50% mark across all international marketplaces — a September Marketplace Pulse report said.

Beijing has already intensified efforts to collect taxes on its citizens’ overseas income, Bloomberg reported in June, a push that follows China’s earlier implementation of the Common Reporting Standard — a global information-sharing system aimed at preventing tax evasion.