Cross-border e-commerce has gone through the era of rapid and extensive development, and has slowed down to the present, and the cross-border e-commerce market environment is developing in the direction of compliance and institutionalization, which is a new challenge for cross-border sellers.
HMRC implements new tax rules
Recently, the UK market has introduced new policy requirements for tax compliance. HM Revenue & Customs (HMRC) has issued a notice saying that new tax rules will be implemented from 1 January 2024, requiring platforms such as Etsy, Depop and Vinted to record and report their sellers' earnings to HMRC on an annual basis.
/图源：accountancyage
Who is affected?
The new rules will affect digital platforms in the UK, including some apps and websites that help merchants sell goods or provide services. Examples include the provision of taxis and private hire services, food delivery services, freelancing, and renting out short-term accommodation.
Under the new rules, platforms such as Vinted, Depop and Etsy will be responsible for recording and handing over seller information to HMRC. If the platform fails to provide seller information data, or submits incomplete, inaccurate, and unverified seller records, it will face significant fines and penalties.
It is understood that the first reporting deadline for these platforms will be one year after the rules were introduced, that is, on January 31, 2025.
At the same time, the new rules will also affect individuals or companies that sell goods and provide services on these platforms. The new tax rules will help HMRC to grasp the income and other information related to sellers in the first time, ensure information transparency and compliance, and will severely crack down on tax evasion.
Under HMRC's new regulations, these platforms will inevitably increase the pressure on the seller group. If the seller fails to comply with all the necessary tax regulations, the platform may have corresponding penalties, and even the new regulations will bring some unexpected tax bills.
Sellers earning £1,700 or less on less than 30 sales in a one-year reporting cycle are not required to provide information to HMRC, but this does not mean that these sellers are not obliged to file a tax return.
The era of strict supervision of cross-border e-commerce
The new tax rules implemented by HMRC are actually similar to the US Consumer Notification Act, which came into effect in June last year. The Consumer Notification Act also requires e-commerce platforms such as Amazon, eBay, and Walmart to collect, verify, and disclose information about third-party sellers who meet certain requirements.
It seems that the disclosure of information is simple, but in the process of implementation, it has caused a lot of turmoil. Video Verification, Bank Card Verification, Postcard Address Verification...... In a limited time, all kinds of verifications were completed, and the account was banned if you didn't pay attention, and many sellers also incurred a lot of losses.
There will be similar regulatory requirements on the European side, where the EU Administrative Cooperation Directive Amendment 7 (DAC7) requires online sales platforms in the EU (e.g., Amazon, Ebay, etc.) to collect, verify and report VAT or tax data and financial data of selling partners residing in the EU.
DAC7 also caused a large number of local EU accounts to be "killed" one after another, and many accounts were frozen and blocked after the end of the review period. Local accounts have certain natural advantages, but due to the high threshold for local accounts to apply for themselves, many domestic sellers buy accounts from service providers.
After the service provider is registered, the seller needs to operate by himself and pay the tax declaration as required, but many sellers actually do not file the tax return, which leads to the tax bureau chasing a large amount of tax in the process of review. Due to the large amount of back taxes, many sellers can only choose to transfer their positions urgently, transfer the balance before the funds are frozen, and then abandon the account.
On the other hand, if the tax address of a local account purchased from a service provider is not the real address, then it is a mine, and something will happen sooner or later. Whether it is an appeal or a service provider, the probability of success is very small. Therefore, we can also see that recently, many cross-border e-commerce companies are facing bankruptcy and dissolution due to local accounts.
As cross-border e-commerce enters the era of strict regulation, challenges and opportunities coexist. Only by adapting to the situation, actively embracing change, and ensuring compliant operations can we achieve steady and long-term success.
This article is provided by 18 Supply Chain, and for more up-to-date information, please refer to the official account "18 Supply Chain Cross-border Logistics".
Editor of this article: Xiaoba