A TikTok Shop seller with 5 in monthly revenue (in ten-thousands)—what taxes do they actually owe at year-end? The short answer: yes, but you will most likely trigger only two of the three tax lines. “Goods in” (customs duty + import VAT paid at clearance), “money out” (sales-side VAT or platform-withheld VAT), and “profit consolidation” (corporate or personal income tax). Three switches—entity type, operating channel, and goods flow direction—determine which lines you trigger. Get one wrong, and your tax base effectively doubles.
Below, a set of concrete numbers walks through the trigger conditions and per-unit profit deductions. No accounting background needed—just know how to subtract. If you are still comparing platforms, you can first readwhich platform makes more sense without a team and on a budget under fifty thousand, then come back and see which rules apply to your situation.
Three Taxes Map to Three Business Flows: First, Determine Which Ones Apply to You
- Goods-In Line (Customs Duty + Import VAT): The triggering entity is the importer (you personally or your company), and the trigger point is cargo customs clearance. Whether you sell on Amazon, TikTok Shop, or your own independent site, as long as goods ship from China to the destination country, the destination country's customs will levy duty on the CIF value (merchandise + freight + insurance), then layer import VAT on top of the duty-paid value. Domestic shipments are cleared on a per-order basis; overseas warehouse stock is paid in bulk per container. The timing differs, but the tax base remains the same.
- Money-Out Line (Sales-Side VAT / Withholding VAT): The triggering entity is the seller, and the trigger point is invoicing or platform withholding. In the EU and UK markets, once you exceed the registration threshold (e.g., €10万 in Germany), you must register for VAT and file at 19%–25%; Amazon and TikTok Shop have already activated withholding mechanisms in certain countries, meaning VAT has already been deducted from the payment you receive, but you still need to file an annual difference reconciliation. For sales made from mainland China under a corporate entity, VAT follows either the standard rate (9% or 13%) or the simplified levy (3% or 1%), depending on the entity type and sales volume.
- Profit Line (Corporate Income Tax / Personal Income Tax)： The triggering entity is the taxpayer, and the trigger point is the annual final settlement. A limited company pays corporate income tax on its taxable income; small and micro enterprises enjoy an effective tax burden of 5% through the end of 2025; sole proprietors pay 5%–35% on business income under a five-tier progressive rate, with VAT exemption for quarterly turnover below 30 ten-thousand RMB. If you haven't decided on your entity type yet,The 30-Second Decision Method for Your First Cross-Border E-Commerce Business Licensecan help you lock in whether to go with a sole proprietorship or a limited company.
Calculating One Order: How Much of Your Gross Margin Does Tax Actually Eat
Turning "how to calculate cross-border e-commerce profit" into a formula you can work through by hand. Assumptions: average order value $25 (approx. ¥180), procurement cost ¥60, first-mile logistics ¥18, platform commission 8%, import duty 7.5% (HS code 8544 example), import VAT 20%, domestic China VAT 9% (standard rate), corporate income tax for small/micro enterprises 5%.
The deduction chain is as follows: sale price ¥180 × 92% (after commission) = ¥165.6 → duty-valued price = (60 + 18) ÷ 1.2 = ¥65 → duty = 65 × 7.5% = ¥4.88 → import VAT = 65 × 20% = ¥13 → VAT output = 180 × 9% − 78 × 9% = ¥9.18 → pre-tax profit ≈ 165.6 − 60 − 18 − 4.88 − 13 − 9.18 = ¥60.5 → income tax = 60.5 × 5% ≈ ¥3.03 → After-tax net profit ≈ ¥57.5, gross margin approximately 31.9%.
Two boundary conditions to remember: for individual businesses, quarterly sales below RMB 30 wan are exempt from VAT; once exceeded, the 1% simplified levy applies rather than 9%. For limited companies, annual taxable income below RMB 300 wan qualifies for the 5% effective tax rate under the small-and-micro enterprise regime. For newcomers with monthly turnover in the RMB 1 wan–30 wan range, the individual business exemption threshold covers nearly the entire operating period — entity choice is a core variable that directly impacts profit. Independent-site sellers must also complete customs registration and export tax rebate filings on their own; for the compliance path, seeFrom Product Selection to Launch: How to Build a Cross-Border E-Commerce Independent Site.
Three Most Commonly Miscomputed Points
- Platform-withheld VAT ≠ Exemption.The VAT withheld by Amazon or TikTok Shop in the EU is merely “pre-paying a portion for you” — annually, you must still file the difference between actual sales and the withheld amount through OSS (One-Stop-Shop) or the tax systems of each member state. Over-withholding is refunded, under-withholding must be topped up; under-reporting triggers back-tax assessments plus a daily penalty of 0.05%.
- The individual business tax threshold is not “exemption from all taxes”.Monthly sales below 10 wan RMB (quarterly 30 wan RMB) are exempt from VAT, but once exceeded, the rate switches to the 1% simplified levy (small-scale taxpayer basis) — it does not jump to 13%. Tariffs and income tax are unaffected by the threshold and remain payable as usual.
- The tariff base is the CIF price, not the purchase price.CIF = goods value + freight + insurance. Many beginners calculate the 7.5% tariff using only the purchase price of ¥60, overlooking the inbound freight of ¥18, resulting in an under-declared tax base. When customs issues a supplemental assessment, the tariff is recalculated on the actual CIF; the difference accrues a penalty of 0.5‰/day, and the larger the stock volume, the bigger the gap.
FAQ
How are taxes for prior years handled after converting a sole proprietorship into a limited company?
Business income already taxed under the sole proprietorship entity will not be subject to retrospective review; any unreported amounts will be assessed by the tax authority under the original entity with late-payment surcharges applied. Before transferring or dissolving the entity, it is advisable to file a comprehensive return covering the full operating period to clear any unclaimed input VAT and residual asset values, preventing the new entity from inheriting the old tax base and triggering double taxation.
Is the customs duty for overseas warehouse inventory paid as a single lump sum for the entire shipment or in installments based on individual dispatches?
It is paid as a single lump sum for the entire batch. Upon arrival at the port, customs duty and import VAT are calculated on the total CIF value of the full container or batch, and subsequent individual order pickups from the warehouse are not subject to repeated charges. The larger the stock volume, the higher the absolute customs duty per clearance, but for low-priced small items, the per-unit cost spread across a single clearance is far lower than per-order direct shipping.
Can the VAT withheld by the platform be deducted directly as a cost reduction in profit calculations?
Yes. The withheld VAT is, in accounting terms, your output tax that has been paid on your behalf. When calculating taxable income, it is recorded under the "Taxes and Surcharges" line item and directly offsets profit. However, it does not reduce your filing obligation for any portion not yet withheld, nor can it be claimed again as input VAT, to avoid double counting.
