12000+VAT incident, another "hidden danger" in the cross-border circle

Another "hidden danger" in the cross-border circle!

In recent years, relevant policies on cross-border e-commerce have been tightened, and compliance has become a high-frequency word. However, there are still many people who "go against the wind" and related scandals continue to emerge. In addition to the well-known logistics chaos and agency operation scams, the VAT market is also full of thorns.

I believe many people have heard about the recent incident of 11,000 VAT accounts being stolen. The latest news shows that the number of companies suspected of address theft has increased from 11,000 to 12,000. Obviously, the address theft in this incident is likely to involve tax fraud and other criminal activities. At present, HMRC has not found any evidence of fraud or fraudulent intent, but is continuing to conduct a rigorous investigation.

As strict inspections continue, this value may have room for appreciation in the future.

Influenced by this incident, the EU, especially the UK, will conduct stricter VAT reviews on Chinese sellers in the future.

The operation process of a large number of fake addresses has triggered a series of "butterfly effects". HMRC has tightened the review of VAT registration of overseas companies. Now HMRC has introduced a new inspection method to avoid the behavior of a large number of companies stealing residents' residential addresses. In addition, the time for UK VAT registration has also been greatly extended. It is not uncommon for the number to be not issued for 5 months.

It is not difficult to see that HMRC continues to increase its efforts to rectify tax issues. Overall, there are quite a few companies that have gone bankrupt. Since 2016, 120,000 VAT applications have been rejected or forced to withdraw by HMRC, and 10,000 companies have been removed from the VAT register due to suspected fraud.

In response to this large-scale VAT explosion, an industry insider explained that previously, the registered address of VAT must be a UK address . Some tax agents did not have an office address in the UK, so they stole some residents' addresses to "pass off fake addresses as real ones". After the problem was exposed, the VAT under their names would face a situation where no one managed it, no one declared it, and fines accumulated! This situation can be interpreted as unscrupulous service providers betting on the inspection rate of the tax bureau, which is essentially a behavior of cheating sellers.

Different from sellers who are passively deceived, there is another group of sellers who make mistakes knowingly.

It is normal to register a platform store with a European local company. However, many sellers take advantage of the advantages of local accounts to register EU shell companies in order to evade withholding VAT. Originally, this operation was only circulated in a small range, but since this year, it has been used by more cross-border sellers.

Then, according to past rules, it is only a matter of time before the relevant sellers are rectified by platforms such as Amazon.