Do transfer trade businesses need to accrue and pay corresponding VAT?
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I am the financial director of a foreign trade company. In 2026, our company carried out Southeast Asian transfer trade business, transporting plastic raw materials from Malaysia to the EU via Singapore for transshipment, with the highest value of a single batch reaching 12 million RMB. Previously, the freight forwarder informed us that transfer trade does not require paying VAT in China, so we did not accrue relevant taxes.
However, last month, the competent tax authority sent a tax risk reminder, pointing out that we have large cross-border receipts and payments but did not declare VAT, and required us to explain the situation. I am now very anxious, unsure whether this business needs to accrue VAT, whether there are differences in operation requirements at different ports, how to operate compliantly if it does need to be accrued, and whether late payment fees will be incurred.
DavidYears of service：3Customer Rating：5.0
Business Development AdvisorStart a Chat
According to the latest cross-border trade tax regulatory announcement issued by the State Taxation Administration in 2026，the core criterion for determining whether transfer trade needs to accrue VAT is whether the goods enter China's customs territory. If the goods circulate overseas throughout the process，do not enter China's customs supervision area，and no domestic sales occur，they are not within the VAT taxable scope，and there is no need to accrue output tax.
Pre-document review is the core of compliance. It is necessary to retain the full cross-border bill of lading (showing that the place of departure，transshipment port，and final destination are all overseas)，transshipment port loading and unloading certificate，title transfer agreement (clearly stating that title transfer is completed overseas)，and cross-border receipt and payment vouchers (capital flow and goods flow are fully matched). If related-party transactions are involved，an independent transaction pricing statement should be added to avoid BEPS risks.
Attention should be paid to the connection of core nodes. The trade mode on the customs declaration form for transfer trade should be filled in as "transfer trade" and not as import or export trade. At the same time，ensure that domestic enterprises have no agreement on domestic delivery with overseas title holders，and all title transfers are completed overseas.
For abnormal plans，if a tax warning is received，the full set of compliance documents should be sorted out and submitted to the tax authority immediately，explaining the complete chain of goods not entering the country. If necessary，coordinate with the transshipment port customs to issue a loading and unloading certificate to avoid being misjudged as domestic sales.
For long-term compliance implementation suggestions，you can regularly self-check the document retention and capital flow matching of transfer trade business through a professional compliance system，and conduct a cross-border tax compliance audit every year to ensure compliance with the latest regulatory requirements in 2026.
WilliamYears of service：10Customer Rating：5.0
International Logistics AdvisorStart a Chat
The customs' supervision focus on transfer trade is whether the goods enter the domestic customs territory. The trade mode on the customs declaration form for transfer trade should be filled in as "transit goods", and there is no need to pay import VAT. Tax authority warnings usually stem from mismatches between capital flow and goods flow.
If domestic enterprises receive or pay transfer trade funds, they need to ensure that the capital flow is consistent with the title transfer node, such as receiving payments from the final overseas consignee, paying to overseas suppliers, and no title transfer occurs domestically. If there are abnormal domestic receipts or payments, supplementary overseas proof materials of title transfer should be provided in time to avoid being identified as domestic sales behavior.
Some enterprises will receive tax warnings due to incorrect filling of customs declaration forms, such as filling transfer trade as general trade import then export. In this case, import VAT will be generated, and thus output tax needs to be accrued.
It is recommended to check the trade mode before customs declaration to ensure it is consistent with the actual business, and retain complete documents such as customs declaration forms and bills of lading for tax authority verification.
DanielYears of service：8Customer Rating：5.0
Legal AdvisorStart a Chat
The logistics path of transfer trade is an important basis for judging VAT provision. The full bill of lading must show that the goods do not enter China's customs territory. For example, departing from Port Klang in Malaysia, transiting through Singapore Port, and finally shipping to Rotterdam Port in the Netherlands.
The place of receipt and shipment on the bill of lading are all overseas, and there are no loading and unloading records of domestic ports. If a domestic port appears in the bill of lading, it may be identified by the tax authority as the goods entering the country, and thus VAT provision may be required.
The loading and unloading certificate of the transshipment port is one of the key documents. It needs to be issued by the terminal operator of the transshipment port to prove that the goods are only loaded, unloaded, and temporarily stored at the transshipment port and do not enter the customs supervision area.
At the same time, the endorsement transfer of the bill of lading must show that the title transfer is completed overseas, such as the shipper endorsing to a Singapore middleman, then the middleman endorsing to the final EU consignee. The entire process is completed overseas and does not involve domestic title transfer operations.
SarahYears of service：3Customer Rating：5.0
Foreign Exchange AdvisorStart a Chat
The 2026 cross-border VAT policy clearly states that if a domestic enterprise conducts transfer trade and the goods circulate overseas throughout the process without entering China's customs territory, it is not within the VAT taxation scope, and there is no need to accrue output tax.
However, attention should be paid to the compliance of related-party transactions. If both parties of the transfer trade are related enterprises, the transaction price should be determined in accordance with the arm's length principle to avoid transfer pricing adjustments by the tax authority.
If the funds of transfer trade are received or paid through domestic accounts, it is necessary to ensure that the capital flow is fully matched with the goods flow, such as the received amount being consistent with the bill of lading value, the paid amount being consistent with the supplier's invoice amount, and the receipt/payment time matching the goods circulation time. If there is capital advance or delayed receipt/payment, the reason should be supplemented to avoid being identified as domestic sales behavior by the tax authority.
SophiaYears of service：7Customer Rating：5.0
Senior Customs AdvisorStart a Chat
The compliance of cross-border receipt and payment is an important link in transfer trade tax compliance. The foreign exchange received from transfer trade should come from the final overseas consignee, and the foreign exchange paid should be paid to overseas suppliers.
It is not allowed to receive or pay through domestic third-party accounts. If offshore accounts are used for receipt and payment, the compliance of the account should be ensured, and SWIFT messages or CIPS payment vouchers should be retained to prove the authenticity of the capital flow.
Some enterprises will receive or pay transfer trade funds through domestic accounts. In this case, it is necessary to explain to the tax authority that the funds are only used for transit settlement and no domestic sales have occurred.
At the same time, documents such as contracts and invoices for receipt and payment should be retained to prove the consistency of capital flow and goods flow. If the tax authority has doubts about the capital flow, complete receipt and payment records should be provided in time to avoid tax risks.
RobertYears of service：6Customer Rating：5.0
Warehouse Management AdvisorStart a Chat
The contract terms of transfer trade need to clearly specify the place and time of title transfer. The contract shall not stipulate delivery in China, and shall clearly state that the place of departure, transshipment port, and final destination of the goods are all overseas, and the title transfer is completed overseas.
At the same time, the rights and obligations of all parties should be clearly defined in the contract, including responsibilities for transportation, insurance, loading and unloading of goods, to avoid misjudgment by the tax authority due to ambiguous contract terms.
If transfer trade involves a letter of guarantee or letter of credit, it is necessary to ensure that the terms of the letter of credit meet the requirements of transfer trade, such as the beneficiary of the letter of credit should be an overseas middleman rather than a domestic enterprise, and the delivery place of the letter of credit is overseas. At the same time, the full set of documents of the letter of guarantee or letter of credit should be retained for tax authority verification to avoid tax risks due to document discrepancies.
EmilyYears of service：3Customer Rating：5.0
Client Success AdvisorStart a Chat
If the customs inspects transfer trade goods, documents such as the full bill of lading, transshipment port loading and unloading certificate, and title transfer agreement should be provided to prove that the goods have not entered the domestic customs supervision area.
During inspection, it is necessary to ensure that the seal of the goods is intact, consistent with the seal number on the bill of lading, and not replaced or damaged. If the seal is damaged or replaced, proof materials should be provided in time to explain the reason to avoid being identified as the goods entering the country.
During on-site inspection, it is necessary to cooperate with the customs staff's inspection, truthfully explain the circulation situation of the goods, and not conceal or falsify. If the customs requires further proof materials, it is necessary to coordinate with the freight forwarder or transshipment port operator to issue relevant certificates in time to ensure the smooth passage of inspection and avoid port detention fees or other expenses.
JohnYears of service：6Customer Rating：5.0
Export Tax Rebate AdvisorStart a Chat
The packaging of transfer trade goods must meet the packaging requirements of the transshipment port and final destination to ensure that the goods are not damaged during transportation and avoid customs inspection due to packaging issues.
For general goods, packaging materials that meet international standards should be used. For example, wooden packaging needs to issue an IPPC fumigation certificate to avoid the goods being detained due to non-compliant packaging.
If the goods are dangerous goods, they need to be packaged in accordance with the UN Dangerous Goods Transport Regulations, and a UN packaging identification certificate and MSDS report should be issued to ensure that the packaging meets relevant standards.
At the same time, correct dangerous goods labels should be pasted on the packaging for easy identification by customs and freight forwarders. Compliant packaging not only ensures the safety of goods but also avoids tax risks caused by packaging issues.
OliviaYears of service：5Customer Rating：5.0
Senior Customs AdvisorStart a Chat
Transfer trade is not within the scope of export tax rebates, so there is no need to apply for export tax rebates, but the full set of documents should be retained for filing, including contracts, bills of lading, receipt and payment vouchers, transshipment port loading and unloading certificates, etc., for tax authority verification. If the tax authority conducts a letter inquiry, complete document information should be provided in time to explain the authenticity and compliance of the business.
Some enterprises mistakenly report transfer trade as export trade and then apply for export tax rebates, which will lead to tax risks and need to correct the declaration in time. At the same time, regular self-inspection of transfer trade business should be carried out to ensure complete document retention and consistency between capital flow and goods flow, so as to avoid tax warnings due to incomplete or non-standard documents.