A company plans to engage in transit trade and wants to understand the related tax matters, fearing risks from improper tax handling. The best answer states that transit trade mainly involves customs duties, value-added tax, and corporate income tax. Generally, import duties are not required, except in special circumstances; domestic VAT is usually not involved, but VAT may be payable on service income; profits from transit trade must be included in taxable income for corporate income tax payment, and transaction vouchers should be kept well.
How is transit trade taxed domestically? Come and find out!
Resolved
Our company intends to engage in transit trade business and has no prior experience in this area, so we are not very clear about domestic tax regulations. We would like to ask how transit trade is taxed domestically, what tax types are involved, and what the basis for taxation is. We hope that friends with expertise can explain in detail so that our company can do a good job of tax planning and avoid tax risks when conducting business.
Trade Expert Insights Answers
David ChenYears of service：10Customer Rating：5.0
Trade Compliance AdvisorStart a Chat
The tax situation for transit trade in China is as follows:
First, regarding value-added tax (VAT), transit trade is not considered a taxable act for VAT and generally does not require VAT payment. This is because the goods do not actually enter the domestic consumption link.
Second, customs duties. Since the goods do not enter the national customs territory, customs duties are typically not levied.
In terms of corporate income tax, companies are required to pay corporate income tax on the profits derived from transit trade. The basis for taxation is the taxable income, which is calculated as the revenue from transit trade minus deductible items such as costs and expenses. The general tax rate is 25%. If the company meets tax preferential conditions, such as being a small low-profit enterprise, corresponding preferential tax rates may apply.
In addition, stamp duty may be involved if relevant contracts are signed. Stamp duty needs to be paid according to the corresponding tax rate based on the nature of the contract. When conducting transit trade, it is recommended to manage contracts well, accurately calculate relevant income and expenses, and pay taxes according to regulations.
Michael ZhangYears of service：10Customer Rating：5.0
Customs Clearance SpecialistStart a Chat
Transit trade mainly involves corporate income tax. As long as there are profits, they must be taxed according to regulations. It is important to accurately calculate revenue and costs, and avoid omitting revenue or overstating costs, otherwise tax risks will arise.
Thomas LiYears of service：7Customer Rating：5.0
Import Licensing AdvisorStart a Chat
Remember the stamp duty. If you sign contracts, such as purchase and sale contracts, you need to pay stamp duty at a tax rate of three ten-thousandths. Don't overlook this small tax, otherwise, if you are audited, you will have to pay back taxes and late fees.
Richard WuYears of service：8Customer Rating：5.0
Global Trade Operations ExpertStart a Chat
Transit trade does not incur VAT or customs duties. It mainly involves corporate income tax and stamp duty. Corporate income tax is calculated based on profits, and stamp duty depends on the contract. Therefore, the contract amount should be confirmed, as it affects tax payments.
Kevin HuangYears of service：3Customer Rating：5.0
E-Commerce Export AdvisorStart a Chat
Tax treatment should be standardized. All transit trade documents, such as contracts and transportation documents, must be well preserved for tax inspections. When filing corporate income tax, cost and expense deductions must comply with regulations.
Olivia LiuYears of service：6Customer Rating：5.0
Foreign Exchange Risk ManagerStart a Chat
When paying taxes for transit trade, pay attention to changes in tax policies. New (preferential policies) may emerge, and utilizing them can save a lot of taxes. Furthermore, tax declarations and payments must be timely and accurate.
Daniel KimYears of service：4Customer Rating：5.0
Commodity Inspection and Quarantine ConsultantStart a Chat
In addition to corporate income tax and stamp duty, if services such as agency transit trade are involved, there may be other tax issues that need to be clarified in advance to avoid tax loopholes.
Emma ZhaoYears of service：3Customer Rating：5.0
Export Documentation SpecialistStart a Chat
In transit trade, determining the time of income recognition is crucial, as it affects the timing of corporate income tax payment. Recognize income according to regulations, and do not advance or delay it, otherwise, there will be trouble.
Sophia WangYears of service：6Customer Rating：5.0
International Logistics CoordinatorStart a Chat
When calculating corporate income tax, reasonable expenses can be deducted, but they must have legal supporting documents. For example, travel expenses, office expenses, etc., all require invoices or other evidence to be retained.
Robert TanYears of service：5Customer Rating：5.0
International Market Development AdvisorStart a Chat
For transit trade taxation, maintain communication with tax authorities. Ask questions promptly when in doubt, which can reduce tax risks and allow business to proceed more smoothly.