In import-export trade practices, buyers are often required to pay various kinds of “commissions” to third parties in order to complete their procurement. However, not all commissions should be included in the customs exempt price. Under the current provisions, the purchase commission (i. E. The cost of labour paid by the buyer to its own procurement agent) is not included in the tax price, while other types of commission (e. G. Seller's commission, brokerage fees, etc.) are counted. This seemingly clear distinction is often controversial in practice。
In recent years, there have been frequent cases of misdeclaration of commissions leading to adjustments in customs prices, surcharges and even suspected smuggling. Some of the businesses disguised the money that should have been included in the tax price as “purchase commission” and attempted to circumvent customs duties; others were misjudged by customs as concealing the real transaction price because of vague contractual terms and unclear financial flows. In judicial practice, the determination criteria of courts and customs have become more stringent around what constitutes a real commission for the purchase and how to prove its independence, and the risk of corporate compliance has increased significantly。
Main manifestations
(i) confusion of concepts: “purchase commission” and “other commission”。
Many businesses mistakenly believe that they are exempt as long as the buyer pays the commission. In fact, article 21 of the customs code clearly states: “the price of the goods imported ... Includes commissions and brokerage fees other than purchase commissions charged by the buyer. “the key is to identify the statutory content of “purchase commission”。
The purchase commission is the labour remuneration paid by the buyer to its purchasing agent for the purchase of imported goods, who only provides procurement services, does not own the goods, does not assume the risk of the transaction and has no interest in the seller. Other commissions are paid to sellers ' agents, off-shore intermediaries, independent brokers, which in essence form part of the price of the goods transaction and are legally charged to the tax-exempt price。
In practice, many of the so-called “procurement agents” are resellers (purchases and sales), and the “commissions” they collect are profit margins and are legally part of the tax-exempt price。
(ii) insufficient evidence: it is difficult to prove the authenticity and independence of the agency relationship. Even if an enterprise claims that an expenditure is a commission for the purchase, the customs authorities are entitled to treat it as a taxable sum if they do not provide sufficient evidence that it meets the conditions set out in the customs act and the customs scheme for validation of the exchequer prices of imported and exported goods (hereinafter referred to as " the arbitration scheme " ). Common problems include: the lack of a clear distinction between the price of the goods and the cost of the services in the contract; the fact that the commission is collected through the seller's account, resulting in a financial closure; the connection between the presence of an agent and the seller's or buyer's equity, control or interest; and the fact that the commission rate is significantly above the market reasonable level (e. G., 10 per cent over the value of the goods) and lacks commercial justification. (iii) stronger regulation: from formal compliance to substantive penetration。
Law enforcement and judicial cases in recent years have shown that customs and courts no longer judge the nature of commissions solely on the basis of the name of the contract or the invoice item. Rather, they look at the structure of the transaction, the risk-taking, the role of the agent, the flow of funds, etc。
For example, in case no. 45 (2022) zenium 03, payments made by an enterprise in the name of “offshore procurement services fees” were identified as part of the actual purchase price, as its agents actually assumed procurement decisions and inventory risks. At the same time, in a number of customs audits, it has been shown that when agents participate in pricing, advance funds or take the risk of de-sale, their identities are closer to traders than to agents, and the costs cannot be excluded from the tax-exempt price。
Inconsistent deep profile
The source of the buyer's commission dispute is much more than a simple definition, but is the projection of multiple deep-seated contradictions in a specific context:
(i) compatibility of the form of the transaction with the principle of rule。
In modern international trade, proxy models are becoming increasingly diverse. From a simple introduction to integrated services such as supply chain management, quality control, logistics coordination, and vendor management, with in-depth participation, the role of agents has evolved from being a “wielder” to a “service integrator”. The exchange payments are also often packaged as a “service fee” rather than a mere “commission”. The relative principles and static nature of the provisions of the ama, however, make it difficult to cover all emerging business models, resulting in an increasingly blurred border of “buyer commissions” that gives a different interpretation to both parties。
(ii) contradictions between enterprise tax planning and customs enforcement。
For multinational enterprises, procurement through intra-group or related third parties and the payment of commissions or service fees are common global supply chain management and tax optimization arrangements. Its purpose may be entirely legitimate, such as harnessing professional procurement advantages and consolidating resources. But objectively, such arrangements do have the potential to be used to transfer profits and lower taxable prices. Customs, as a national guard, has a statutory duty to ensure that all customs duties are collected. This divergence of positions makes customs cautious and even sceptical about any arrangement that may erode the tax base。
(iii) conflict between enforcement discretion and an enterprise's expected certainty。
As there is room for interpretation of the rules, customs agents have a margin of discretion in reviewing commission arrangements. How “relevant” is determined, how “indirect payments” are judged, and how the “reasonableness” of the value of the service is assessed often depends on the specific evidence of the case and the professional judgement of the agents. This discretion is necessary to combat tax fraud, but it may also result in inconsistent enforcement standards, increase uncertainty about the outcome of the enterprise's clearance, and affect its business expectations and investment confidence。
Responses and recommendations
To ensure that commissions deal with legal compliance, enterprises should take the following measures:
(i) enhanced contract and evidence management。
A clear and detailed service contract with a procurement agent, specifying the specific scope, content, criteria of the service and the independence of the contract for the sale of goods. Maintain a complete chain of evidence for the service process, such as minutes of meetings, inspection reports, market analysis reports, mail exchanges, etc., to prove that the value of the commission is real, independent and valuable, rather than a disguised split of the price of the goods。
(ii) ensure the reasonableness of transaction pricing。
The rates and calculations of commissions or service charges should be commercially reasonable, in particular arrangements with related parties, and should follow the principle of independent transactions. Reference can be made to industry practices, market standards and, where necessary, information on the timing of transfer pricing to demonstrate that the arrangement is consistent with fair-trading principles and provides a compelling supporting document to customs。
(iii) regulate the flow of funds to avoid mixing payments。
The commission should be paid directly by the buyer to the agent's account, avoiding transit through the seller or its related party. If the seller is to be entrusted with payment, a written authorization and a tripartite confirmation record must be kept。
All cross-border payments should be made through formal bank channels and complete payment vouchers and foreign exchange write-offs should be maintained。
(iv) establishing proactive customs compliance systems。
Prior to the implementation of major, long-term agency import arrangements, pre-adjudication or pre-valuation advice with customs may be considered to obtain a relatively definite pro-rated opinion on the customs valuation treatment for the relevant commission arrangement. At the customs clearance level, payments involving commissions should be properly and accurately declared in accordance with the precise method and the customs filling standard, avoiding greater compliance risks arising from concealment or vague declarations。
Concluding remarks
The implementation of the customs code marks a new stage in the modernization and rule of law of our customs system. While the purchase commission is not charged to the tax-exempt price in accordance with the law, its application is subject to the strict premise that it must be paid for real, independent and reasonable procurement agency services. Businesses cannot avoid tax obligations by mere contractual terms. The concept of “substantive compliance” can be effectively protected against customs inspections and legal risks while enjoying legal tax treatment only if it is fully implemented in the areas of transaction design, contract management, financial arrangements and archives retention。
