Is it legal and compliant for related enterprises to apply for export tax refund when conducting cross-border export business?
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I am engaged in the export of outdoor smart home products and have two wholly-owned affiliated factories in China. Previously, my subsidiary trading company directly purchased and shipped the goods. Recently, I plan to adjust the operational structure: first, the trading company will purchase the goods outright and sell them to my affiliated subsidiary in Hong Kong, then the Hong Kong company will sign contracts with overseas clients and complete customs declaration and export.
Now I am stuck on the tax refund issue. I have consulted several peers, some say this operation is completely fine, while others say that account transfer and pricing between related enterprises can easily be deemed as tax fraud, leading to immediate freezing of tax refunds.
I just received a large order worth 30 million RMB from Europe and America last month, so I dare not proceed rashly. I want to clearly know whether export tax refund for related enterprises is legal, and if there are any hard red lines to avoid in advance?
CharlotteYears of service：4Customer Rating：5.0
Currency Exchange AdvisorStart a Chat
Export tax refund for related enterprises is not inherently non-compliant. The core requirement is that all transaction processes comply with the arm's length principle，and common industry misconceptions should be avoided. Many practitioners mistakenly believe that transactions between affiliated entities are 100% compliant as long as the four flows (contract flow，goods flow，capital flow，invoice flow) are consistent. In fact，those who deliberately obtain tax refunds by overstating goods value or transferring title without actual goods movement have been included in the key screening scope of the newly launched related transaction tax control system in 2026.
Once marked as abnormal by the system，the subsequent chain negative reactions will directly affect the normal operation of the enterprise: first，the competent tax authority will launch a full-scale audit correspondence and suspend the approval of all pending tax refunds. At the same time，the customs will increase the inspection rate for all your export goods in the next 3 months，and you will be marked as a high-risk entity by banks in the payment and settlement link，which will directly extend the subsequent foreign exchange settlement review cycle by 7-15 working days.
The core operations for physical risk isolation include three points: First，the pricing of related transactions must deviate by no more than 5% from the average transaction price of non-affiliated customers for the same category in the same period. Deliberately inflating the value of input or output goods is prohibited. Second，complete warehousing receipts and logistics delivery confirmation documents must be retained for all title transfer nodes. Transactions cannot be completed merely through nominal contracts without actual goods movement. Third，the capital path of the Hong Kong affiliated company must be fully traceable，and payment via third-party accounts is prohibited.
Before officially declaring the first tax refund，submit the related transaction structure description and pricing basis to the competent tax authority for pre-verification in advance. Proceed with subsequent procedures only after obtaining the compliance confirmation receipt，which can avoid more than 90% of subsequent abnormal audit correspondence situations.
EmilyYears of service：3Customer Rating：5.0
Client Success AdvisorStart a Chat
The information of the operating entity, shipping entity and corresponding related transaction entities on the customs declaration form must be filled out truthfully, and the affiliated relationship between entities shall not be deliberately concealed. In 2026, the national customs clearance integration system has connected with the affiliated enterprise filing database of the State Administration for Market Regulation.
The system will automatically compare the equity affiliation relationship between the domestic consignor/consignee and the consumer/user/production/sales entity on the customs declaration form. If any concealment is found, it will directly trigger a logical abnormality warning for the customs declaration form. When declaring the value of related transactions, customs declaration forms of non-affiliated transactions for the same category in the same period must be retained as supporting materials.
If selected for price review by customs, submitting the supporting materials directly can quickly complete the price review and clearance without additional clearance delays. If there are customs declaration forms with omitted affiliated relationship information, supplementary declaration shall be made in a timely manner, and do not wait until the subsequent tax audit correspondence to complete the materials, so as to avoid unnecessary late fees or penalty records.
OliviaYears of service：5Customer Rating：5.0
Senior Customs AdvisorStart a Chat
The logistics tracks of domestic and international segments corresponding to title transfer between related enterprises must fully match the transaction nodes, and the time difference between the logistics track and title transfer shall not exceed 72 hours. If goods are directly shipped from a domestic affiliated factory to overseas clients, the intermediate trading-type affiliated company does not need to conduct secondary warehousing.
As long as the title transfer statement issued by the factory and the domestic waybill for the corresponding segment are retained, the link closed-loop can be completed. When booking shipping space, the shipper information on the bill of lading must be consistent with the operating entity on the export customs declaration form. Do not randomly add the name of the affiliated company to the shipper field, which will lead to document information conflicts.
Apply to the shipping company in advance for a 7-day extension of the free detention period at the destination port to avoid additional container detention costs caused by document delays due to subsequent tax refund verification. If transshipment at a transit port is involved, all endorsement circulation records of the bill of lading must be retained and filed as supporting materials for subsequent tax refund.
WilliamYears of service：10Customer Rating：5.0
International Logistics AdvisorStart a Chat
Pricing documents for related transactions must be retained in accordance with the latest 2026 BEPS compliance requirements. The master file and local file of contemporaneous documentation shall cover the transaction records of all domestic and overseas affiliated entities, and the difference between the pricing and comparable uncontrolled prices shall not exceed the reasonable range specified by the State Taxation Administration.
If the region where the overseas affiliated company is located has a tax haven attribute, prepare the substantive operation supporting materials for the transaction in advance. Do not use only shell companies as intermediate circulation entities, otherwise it will be deemed as an unreasonable tax structure arrangement, and the enterprise will be required to make tax adjustments.
Transactions between domestic affiliated companies shall issue VAT special invoices in full amount according to the actual transaction amount. Do not inflate the refundable tax amount by underissuing input invoices or overissuing output invoices. Borrowing interest and current accounts between related parties shall be accounted for separately and shall not be mixed into the settlement path of export payment.
AlexanderYears of service：10Customer Rating：5.0
Senior Trade AdvisorStart a Chat
The payment and settlement path for related transactions must be completely consistent with the contract amount, invoice amount and customs declaration amount, and no balance suspension is allowed. In 2026, the CIPS system has launched the related transaction traceability module. All cross-border RMB payment and settlement records will automatically mark the affiliated relationship between the two parties.
As long as the corresponding export customs declaration number is clearly marked in the record remarks, the foreign exchange receipt verification can be completed quickly without foreign exchange receipt suspension. Capital transfers between offshore accounts and domestic corporate accounts must clearly note the nature of the transaction.
Non-trade current accounts between related enterprises shall not be regarded as export payment to apply for tax refund. If a SWIFT message is marked as a related transaction requiring supplementary explanation, submitting the scanned copies of the corresponding trade contract and customs declaration form directly can complete the appeal without affecting the subsequent foreign exchange settlement process.
DavidYears of service：3Customer Rating：5.0
Business Development AdvisorStart a Chat
The goods sales and purchase contracts signed between related enterprises shall clearly mark the title transfer node, quality acceptance standard and dispute resolution clause, and shall not be signed hastily using general templates. The details of the transaction subject in the contract must fully match the goods details corresponding to the HS code on the subsequent export customs declaration form. The goods name in the contract shall not be inconsistent with that on the customs declaration form.
If overseas clients refuse to pay later, the rights and responsibilities between related enterprises can be clarified through contract clauses to avoid disputes over unclear title and creditor's rights ownership. All contracts and supplementary agreements related to related transactions shall be affixed with the official seals of both parties and retained for filing, serving as core supporting materials for subsequent tax audit correspondence. They can be recognized by tax authorities without additional notarization. At the same time, customs protection filing for intellectual property rights of export goods can be completed in advance to avoid intellectual property infringement disputes during related transactions.
EllaYears of service：10Customer Rating：5.0
Senior Financial AdvisorStart a Chat
When goods exported through related transactions are subject to on-site inspection, prepare the related transaction sales and purchase contract and factory shipment details for the corresponding batch in advance, and cooperate with customs officers to verify whether the actual parameters of the goods are consistent with the declared information. If the actual value of the goods is consistent with the related transaction pricing, even if selected for container unpacking inspection, the entire process can be completed within 4 hours without additional storage costs.
The sealing and unsealing records of the container seal shall be retained simultaneously. If a new seal is replaced after inspection, the number of the new seal shall be recorded in the document filing directory synchronously to avoid subsequent document information inconsistency.
If the goods are subject to inspection and testing, prepare the product composition test report in advance. Submitting it to the on-site customs can greatly shorten the testing cycle without affecting the normal shipment of the goods.
SarahYears of service：3Customer Rating：5.0
Foreign Exchange AdvisorStart a Chat
The filing of tax refund documents for exports by related enterprises must strictly implement the requirement of consistent four flows (contract flow, goods flow, capital flow, invoice flow). All node documents of the four flows must correspond one by one, and no document missing is allowed. In the pre-declaration stage, focus on verifying the matching degree between the invoice information and customs declaration information of related transactions.
If there is a prompt of information comparison abnormality, correct the wrong information in time before submitting the official declaration to avoid triggering the audit correspondence warning. If receiving the audit correspondence notice from the competent tax authority, submit all supporting materials for related transactions within 5 working days. Do not delay the reply time, which may lead to direct rejection of the tax refund review.
The time for foreign exchange receipt verification must strictly comply with the 2026 export foreign exchange receipt policy requirements. Complete all foreign exchange receipt before the VAT declaration period in April of the year following the tax refund declaration. If it is really impossible to receive foreign exchange on time, submit the supporting materials deemed as foreign exchange receipt in advance to avoid affecting the normal arrival of tax refund.
DanielYears of service：8Customer Rating：5.0
Legal AdvisorStart a Chat
The export structure design of related enterprises can be divided according to the functional positioning of different entities. Domestic production-type affiliated enterprises are responsible for production and stock preparation, domestic trading-type affiliated enterprises are responsible for domestic logistics and customs declaration, and overseas affiliated sales entities are responsible for connecting with overseas clients and receiving foreign exchange. The structure with clear division of responsibilities can greatly reduce the overall compliance risk.
For trade terms, FOB at domestic ports is preferred for transaction, clarifying the title transfer node at domestic ports to avoid the problem of unclear title ownership during cross-border transportation. A dynamic cost accounting model can be built, incorporating the pricing of related transactions, tax refund income, logistics cost and exchange rate difference income into the accounting system, calculating the comprehensive income under different structures, and maximizing the overall profit on the premise of compliance. For inventory linkage, a regional shared warehouse can be set up to coordinate the stock preparation of different affiliated entities, reducing the overall storage cost and goods turnover cycle.