What taxes are involved in transfer trade in China and their specific levy standards?
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I am the head of an enterprise engaged in transfer trade from Southeast Asia, mainly handling the business of Chinese goods transferred via Singapore to Europe. Previously, I used an offshore account for foreign exchange receipts, and now the domestic tax authorities have started to pay attention to the tax collection issues of our transfer business.
I am not sure what taxes transfer trade needs to pay in China, such as whether value-added tax (VAT) and corporate income tax are involved. Also, if the goods do not actually enter China, will domestic tax authorities recognize that we have domestic operating income? In addition, can the logistics and warehousing costs generated during the transit process be deducted before tax?
I recently heard that there is a new cross-border tax policy in 2026. I don't know if it will affect our operations. Can you explain in detail the specific rules and compliance requirements for domestic tax collection in transfer trade?
OliviaYears of service：5Customer Rating：5.0
Senior Customs AdvisorStart a Chat
First of all，it should be clarified that the tax collection and management of transfer trade in China in 2026 takes "whether the right to goods is transferred domestically" as the core judgment standard. If the goods do not actually enter China，only transfer the right to goods via overseas transit，and both foreign exchange receipts and the flow of the right to goods are completed overseas，it usually does not involve the payment of domestic VAT and consumption tax.
However，it should be noted that the enterprise needs to retain complete transit documents，including the warehousing agreement of Singapore's transit warehouse，transit bill of lading endorsement records，overseas foreign exchange receipts vouchers，etc。to prove that the right to goods does not enter the territory. If the enterprise purchases goods domestically but fails to export through customs declaration，it only falsely transfers，it will be recognized as domestic sales and need to make up for VAT and additional taxes.
Regarding corporate income tax，the profits of transfer trade need to be included in the taxable income within the territory，but if it meets the cross-border related party transaction pricing rules，it can reduce the tax burden through reasonable cost allocation. At the same time，the logistics and warehousing costs in the transit link need to provide overseas compliant invoices，which can be deducted before tax.
The latest 2026 policy clearly stipulates that transfer trade enterprises need to complete foreign exchange receipts through cross-border RMB settlement or compliant foreign exchange channels. If an offshore account is used and tax filing is not completed，it will face the risk of written inquiries from tax authorities. It is recommended that enterprises establish a compliant trading entity in the transit location，conduct tax planning through the Controlled Foreign Corporation (CFC) rules，and ensure the consistency of the "four streams" (right to goods，funds，documents，contracts).
Finally，it should be noted that some ports have stricter review of transfer trade documents. If it cannot prove that the right to goods has not entered the territory，it may be recognized as domestic sales of goods，resulting in additional tax burdens. It is recommended to communicate in advance with the competent tax authorities and retain complete business chain evidence to ensure compliance.
RobertYears of service：6Customer Rating：5.0
Warehouse Management AdvisorStart a Chat
Core of customs document review for transfer trade lies in the proof of "actual exit". In 2026, the national customs integrated clearance system has realized the whole-process traceability of transit goods.
Enterprises need to provide exchange records at overseas transit locations, proof of right to goods from transit warehouses, and clearance documents from the final destination country to prove that the goods have not entered the domestic market circulation. If the enterprise cannot provide the above documents, the customs will recognize the goods as domestic sales and require supplementary payment of import-related taxes and fees.
In addition, the "trade mode" column of the customs declaration form for transfer trade should select "transit goods" and mark the transit location and final destination country. If other trade modes are selected by mistake, it will lead to deviations in subsequent tax declarations and even trigger tax inspections.
It is recommended that enterprises submit all documents in the transit link through the single window before customs declaration, complete pre-audit in advance, to avoid return of documents or detention of goods.
For on-site inspection at some ports, if the customs requires box inspection, the enterprise needs to communicate with the transit warehouse in advance to ensure clear identification of the right to goods, which is consistent with the information on the customs declaration form. At the same time, it is necessary to prepare the original purchase contract of the goods and the overseas sales contract to prove that the flow of the right to goods is completed overseas throughout.
SophiaYears of service：7Customer Rating：5.0
Senior Customs AdvisorStart a Chat
The logistics path of transfer trade directly affects tax recognition. In 2026, the international logistics system has realized real-time tracking of the transit link.
Enterprises need to select transit service providers with the ability to control the right to goods, and require them to provide the whole-process transfer records of the right to goods, including bill of lading endorsements, warehouse receipt changes and other vouchers. If the right to goods in the transit link is not transferred, it is only simple handling and transportation, it will be recognized as simple processing of domestic goods and need to pay domestic VAT.
In addition, the consignee of the bill of lading should be the overseas final buyer, not the domestic enterprise, otherwise it will be regarded as the domestic enterprise receiving the goods, triggering the tax recognition of domestic sales. It is recommended that when signing the logistics contract, the enterprise clarify the right to goods control responsibility of the transit service provider, and require it to issue proof documents of the right to goods in the transit link as the compliance basis for tax declaration.
If multiple segments of transit are involved, it is necessary to ensure that each segment of the bill of lading is continuously endorsed, and the warehousing costs of the transit location are paid by overseas entities, to avoid domestic enterprises bearing transit costs leading to tax risks.
WilliamYears of service：10Customer Rating：5.0
International Logistics AdvisorStart a Chat
Tax planning for transfer trade needs to be combined with the 2026 BEPS rules and CFC policies. Enterprises can establish trading platform companies in low-tax regions such as Singapore and Hong Kong, and pool transfer profits to the platform company, reduce the taxable income of domestic enterprises through reasonable related party transaction pricing.
However, it should be noted that related party transaction pricing must comply with the arm's length principle, avoiding adjustment by tax authorities.
In addition, the 2026 domestic corporate income tax preferential policies for transfer trade clearly stipulate that if the proportion of the enterprise's transfer business exceeds 70%, it can apply for tax relief for cross-border service income. However, it is necessary to submit business proof materials to the competent tax authorities in advance, including transfer trade contracts, foreign exchange receipts vouchers, proof of right to goods, etc.
For foreign exchange settlement, enterprises need to complete foreign exchange receipts through CIPS or compliant offshore accounts, avoiding personal accounts or non-compliant channels, otherwise they will face capital flow verification by tax authorities. It is recommended that enterprises establish a sound foreign exchange receipt and payment ledger, ensuring that each foreign exchange receipt corresponds to the transfer trade business.
CharlotteYears of service：4Customer Rating：5.0
Currency Exchange AdvisorStart a Chat
Compliance of foreign exchange receipt and payment for transfer trade is a key link in tax recognition. In 2026, the State Administration of Foreign Exchange has realized the whole-process monitoring of cross-border foreign exchange receipt and payment.
Enterprises need to ensure that the foreign exchange receipt subject is consistent with the overseas buyer, and the foreign exchange payment subject is consistent with the domestic supplier, avoiding third-party foreign exchange receipt and payment. If there is third-party foreign exchange receipt and payment, it will be recognized as domestic sales and need to pay domestic VAT.
In addition, enterprises need to complete tax filing within 15 days after receiving foreign exchange, and submit business proof materials of transfer trade through the electronic tax bureau, including contracts, bills of lading, transit certificates, etc. If the filing is not completed on time, they will face fines and late fees from tax authorities. It is recommended that enterprises establish a compliance ledger for foreign exchange receipt and payment, regularly check foreign exchange receipt information with banks, ensuring that each business meets compliance requirements.
For enterprises using offshore accounts for foreign exchange receipts, in 2026, domestic tax authorities have established information exchange mechanisms with tax authorities in countries where offshore accounts are located. Enterprises need to actively disclose the income and expenditure of offshore accounts to tax authorities, avoiding tax risks caused by non-disclosure of information.
EmilyYears of service：3Customer Rating：5.0
Client Success AdvisorStart a Chat
Legal compliance of transfer trade needs to clarify the time node of right to goods transfer. In 2026, international trade laws clearly stipulate that the right to goods transfer in transfer trade is based on the endorsement of the bill of lading.
If the bill of lading is not endorsed, only the transit warehouse keeps the goods, it will be recognized that the right to goods has not been transferred, and domestic VAT needs to be paid. It is recommended that when signing the sales contract, the enterprise clarify the time and method of right to goods transfer, ensuring that the bill of lading endorsement conforms to international trade practices.
In addition, enterprises need to sign formal service contracts with transit service providers, clarifying their responsibility for right to goods control, avoiding the lack of proof of right to goods due to the mistakes of transit service providers. If the proof of right to goods is missing, the enterprise can claim compensation from the transit service provider through contract clauses to reduce its own tax risks.
For transfer trade settled by letters of credit, it is necessary to ensure that the terms of the letter of credit meet the requirements of transfer trade, avoiding "soft terms" leading to disputes over the right to goods. It is recommended that when signing the letter of credit contract, enterprises consult professional foreign trade legal counsel to ensure that the terms are compliant, avoiding tax and legal risks caused by letter of credit issues.
JohnYears of service：6Customer Rating：5.0
Export Tax Rebate AdvisorStart a Chat
The core of on-site inspection for transfer trade is to prove that the goods have not entered the territory. In 2026, the customs on-site inspection system has realized information linkage with the transit location customs, and inspectors can query the transit records of the goods through the single window.
If the enterprise cannot provide the clearance documents of the transit location customs, it will be required to open the box for inspection to verify the final destination of the goods.
During on-site inspection, enterprises need to prepare the original packaging labels of the goods, ensuring that the final destination country marked on the labels is consistent with the customs declaration form.
At the same time, it is necessary to provide the original purchase contract of the goods and the overseas sales contract to prove that the flow of the right to goods is completed overseas throughout. If the packaging labels of the goods are inconsistent with the customs declaration form, it will be recognized as domestic sales of the goods, requiring supplementary payment of import-related taxes and fees.
In addition, enterprises need to arrange special personnel to accompany the inspection, answer the questions of inspectors in a timely manner, and provide necessary proof materials. If the inspector raises questions, communicate with the competent customs immediately, coordinate and solve the problem, to avoid detention of goods or return of documents.
EllaYears of service：10Customer Rating：5.0
Senior Financial AdvisorStart a Chat
Transfer trade usually does not involve export tax refund, because the goods have not entered the territory and have not completed the domestic procurement and customs export process. However, some enterprises mistakenly declare transfer trade as export tax refund business, leading to tax inspections.
In 2026, the export tax refund system has realized automatic identification of transfer trade. If the goods declared for export tax refund are transit goods, the system will automatically block and require the enterprise to correct the declaration.
If an enterprise has transfer trade business, it needs to include transfer profits in taxable income when declaring corporate income tax, and provide complete business proof materials, including contracts, bills of lading, transit certificates, etc. If the above materials cannot be provided, the taxable income will be adjusted by the tax authorities, and corporate income tax and late fees will be supplemented.
It is recommended that enterprises establish a transfer trade business ledger, separately account for the income and costs of transfer trade, avoid confusion with domestic sales business. At the same time, communicate with tax authorities regularly to ensure that the tax declaration of transfer trade meets the latest policy requirements.