Running Both a Domestic and a Cross-Border Store in China: The Accounting Reality Nobody Explains
Short answer: a domestic China store and a cross-border store are usually not two channels inside one accounting file. They can involve two legal sellers, two tax systems, two inventory pools, two payment routes, two currencies, and intercompany transactions between the Chinese and overseas businesses.
The accounting must remain separate at entity level and become unified only in a controlled management or consolidation layer. Combining orders before identifying the seller, stock owner, customs status, and cash recipient can create double-counted revenue, missing tax, mixed inventory, and profit in the wrong entity.
1. The first question is not “Which platform?” but “Who is the seller?”
A foreign brand can operate a domestic store through a Chinese subsidiary, distributor, or another authorized local seller. It can also operate a cross-border store through an eligible overseas entity on a channel such as Tmall Global or JD Worldwide. The brand name may be the same, but the legal and accounting facts are not.
Tmall Global's official merchant materials describe a cross-border flagship model operated by the brand with support from a Tmall Partner. Chinese consumers pay in RMB through Alipay, while settlement can be transferred to the overseas seller's bank account. JD Worldwide's published merchant rules similarly describe eligible overseas entities, overseas corporate bank accounts, and a mainland domestic agent under its current acceptance standard.
| Accounting question | Domestic store | Cross-border store |
|---|---|---|
| Typical seller of record | China-registered company or authorized local seller | Eligible overseas company accepted by the cross-border platform |
| Books | Chinese entity statutory books and tax records | Overseas seller books plus China customs, payment, and platform support |
| Customer sales tax framework | Chinese domestic VAT and other applicable taxes | Cross-border retail import tax for eligible consumer orders; enterprise tax remains separate |
| Inventory | Domestic customs-cleared or locally sourced stock owned by the local seller | Overseas or bonded stock owned under the cross-border operating structure |
| Settlement | Local payment and bank accounts, usually in RMB | Cross-border payment route and overseas settlement, often involving currency conversion |
| Returns | Domestic return, inventory, invoice, VAT, and refund process | Cross-border platform, customs, import-tax, quota, payment, and bonded or overseas stock process |
| Income tax | Chinese seller's taxable income under Chinese rules | Overseas seller's home-country tax plus fact-specific China nonresident or establishment analysis |
A TP or store operator is not automatically the seller. A service provider may manage listings, campaigns, customer service, and logistics. Revenue, inventory, tax, and cash still belong to the entity identified by the contracts, platform account, ownership, and commercial risk.
2. Why must the two inventory pools remain separate?
Domestic and cross-border inventory may look identical at SKU level while having different owners and customs status. That difference controls where the asset is recorded, which seller can fulfill the order, how cost is built, and how a return is processed.
Domestic inventory
Goods imported through general trade or purchased locally enter the Chinese seller's inventory after the applicable customs, purchase, invoice, and tax process. Landed cost can include product price, freight, duty, non-creditable tax, insurance, and other directly attributable costs under the applicable policy.
Cross-border inventory
Goods can remain overseas, move through an overseas fulfillment center, or enter a bonded warehouse before a consumer order. Tmall Global's official materials describe bonded warehouse, global fulfillment, consolidated shipping, and direct-mail options. The customs and ownership trail must remain linked to the overseas seller and consumer order.
One warehouse address does not mean one accounting pool
A logistics provider may handle several stock regimes at related locations. The finance system should still separate owner, customs status, warehouse, channel eligibility, quantity, unit cost, and return status. A warehouse transfer cannot by itself convert bonded cross-border stock into unrestricted domestic inventory.
3. How do revenue and tax differ between the two routes?
Domestic store
The Chinese seller records customer revenue, domestic VAT, cost of goods sold, platform charges, advertising, logistics, payroll, and corporate income tax in its own books. Under the VAT Law effective January 1, 2026, VAT is an extra-price tax. Most ordinary goods carry a 13% rate, while other goods, services, taxpayer methods, and transactions can use different rates or treatments.
The standard Chinese enterprise income tax rate is 25%, but it applies to taxable income after permitted deductions and tax adjustments, not to gross sales. Adding the VAT rate and corporate income tax rate to claim one tax percentage on revenue is incorrect.
Cross-border store
For eligible cross-border retail imports within the policy limits, customs duty is temporarily set at zero and import VAT and consumption tax are collected at 70% of their statutory amount. The current published limits are RMB 5,000 per single transaction and RMB 26,000 per individual per year, subject to the detailed rules.
This consumer import-tax mechanism does not answer whether the overseas seller has China corporate income tax exposure. That analysis depends on the seller's China establishments or places, personnel, agents, contracting activity, profit attribution, China-source rules, and the applicable tax treaty.
The same customer payment can produce different tax records. Domestic VAT sales, cross-border customs value, platform-reported income, accounting revenue, and cash settlement are related but not interchangeable. Each bridge needs source data and a documented rule.
4. Where do intercompany transactions appear?
Once a foreign brand operates both routes, the Chinese and overseas entities often exchange goods, services, money, data, people, or intellectual-property rights. These are not invisible internal movements. They can be related-party transactions requiring contracts, invoices, payment support, foreign-exchange procedures, and transfer-pricing analysis.
| Intercompany flow | Entity-level accounting | Consolidation treatment | Key risk |
|---|---|---|---|
| Overseas parent sells products to Chinese subsidiary | Parent records intercompany sale; subsidiary records purchase and inventory | Eliminate intercompany sale and purchase; remove unrealized inventory profit where applicable | Transfer price, customs value, landed cost, and inventory profit do not agree |
| Chinese team supports cross-border store | Chinese entity may record service revenue; overseas entity records service expense | Eliminate matching service revenue and expense | No agreement, no allocation evidence, or services create tax or establishment exposure |
| Shared advertising or campaign | Contracting entity records supplier charge and any valid recharge | Keep external cost once; eliminate intercompany recharge | Expense sits in the wrong entity or is recorded twice |
| Trademark, technology, or management fee | Royalty or service income and expense under the agreement | Eliminate intercompany amounts while retaining external tax cost | Benefit, substance, withholding, VAT, and transfer price are unsupported |
| Temporary funding | Intercompany receivable and payable, loan, capital, or advance based on substance | Eliminate matching balance | Cash transfer lacks legal basis, registration, interest, or foreign-exchange support |
China's related-party framework follows the arm's-length principle. The documentation and filing requirements depend on the transaction, amounts, parties, and applicable rules. A monthly schedule should identify every related-party balance before year-end tax and audit work begins.
5. Why are settlement and refunds harder in a dual-store model?
The domestic store and cross-border store can use different payment accounts, settlement currencies, payout timing, platform deductions, and refund routes. Group cash cannot be understood from the two bank accounts alone.
Domestic settlement bridge
Cross-border settlement bridge
Refunds add another layer. Under the cross-border retail import policy, eligible goods returned within the prescribed process can support an import-tax refund and adjustment of the consumer's annual transaction total. Accounting must connect the platform refund, payment reversal, customs record, import tax, inventory return, and settlement recovery.
A domestic refund instead follows the local seller's accounting, VAT, invoice, payment, and inventory process. Combining both into one “refund rate” can be useful for operations, but the underlying records must remain route-specific.
6. What should the consolidated management report show?
Consolidation does not mean adding two platform dashboards. The finance team should first close each legal entity, then translate, map, eliminate, and analyze.
- Close each seller separately. Reconcile orders, revenue, tax, settlement, bank, inventory, costs, expenses, and balance-sheet accounts.
- Map to a common chart. Use consistent definitions for sales, refunds, platform fees, advertising, fulfillment, product cost, and contribution margin.
- Translate currencies. Apply the group's approved exchange-rate and translation policy while preserving transaction-currency detail.
- Match intercompany balances. Confirm invoices, services, goods, payment, receivables, payables, and cut-off from both sides.
- Post eliminations. Remove intercompany sales, purchases, service fees, balances, and unrealized profit where required.
- Report external performance. Show revenue, margin, cash, and inventory by route, platform, store, and SKU without internal double counting.
| Monthly output | What management should learn |
|---|---|
| Separate entity profit and loss | Where statutory revenue, cost, and tax sit legally |
| Route contribution report | Whether domestic or cross-border sales create stronger external margin |
| Inventory by owner and status | How much cash is tied up in domestic, bonded, overseas, return, or transit stock |
| Settlement and cash bridge | What is received, in transit, reserved, disputed, or exposed to currency movement |
| Intercompany schedule | Which balances are matched, overdue, unsupported, or require elimination |
| Tax and customs bridge | How books connect to VAT, corporate income tax, import tax, invoices, and customs data |
| Exception list | Which difference needs an owner, document, decision, or correction |
7. Simulated case: two RMB 1.2 million stores do not create the same accounting result
The following is a simulated case created for explanation and does not represent a specific client. A foreign brand has a Chinese subsidiary operating a domestic store and an overseas parent operating a cross-border store. Each store records RMB 1,200,000 of paid consumer orders during the month and RMB 120,000 of refunds.
| Item | Domestic route | Cross-border route | Accounting reality |
|---|---|---|---|
| Paid consumer orders | RMB 1,200,000 | RMB 1,200,000 | Same dashboard amount, different sellers and records |
| Refunds | (RMB 120,000) | (RMB 120,000) | Different invoice, customs, tax, settlement, and return workflows |
| Net consumer order amount | RMB 1,080,000 | RMB 1,080,000 | Still not a comparable accounting-revenue number |
| Illustrative domestic output VAT | RMB 124,248 | Not applicable | Domestic amount assumes ordinary goods at 13% and a general VAT taxpayer: RMB 1,080,000 × 13 ÷ 113 |
| Illustrative domestic revenue excluding VAT | RMB 955,752 | Not applicable | Domestic seller's simplified revenue starting point |
| Illustrative cross-border retail import tax | Not applicable | RMB 98,280 | Assumes eligible goods, 13% import VAT, no consumption tax, zero temporary duty, and a tax base of RMB 1,080,000: 13% × 70% |
| Seller recording the external sale | Chinese subsidiary | Overseas parent | Separate ledgers and income-tax positions |
| Inventory recording | Domestic stock | Bonded or overseas stock | Separate owners, customs status, costs, and return locations |
The cross-border tax example is intentionally narrow. Goods subject to consumption tax, different VAT rates, orders outside the limits, goods outside the positive list, freight and insurance in the customs value, or a different import route require a different calculation. The import tax is not the overseas seller's corporate income tax.
Intercompany product sale in the same simulation
The overseas parent invoices RMB 500,000 of goods to the Chinese subsidiary for domestic-store inventory. The parent's underlying group product cost is RMB 350,000, while the Chinese subsidiary incurs RMB 20,000 of external landed cost.
- The overseas parent records an RMB 500,000 intercompany sale in its own books.
- The Chinese subsidiary records an RMB 500,000 purchase plus qualifying landed cost under its policy.
- The consolidated group removes the RMB 500,000 internal sale and purchase.
- For units sold externally, group cost reflects the RMB 350,000 underlying product cost plus the relevant external landed cost.
- For units still in inventory, unrealized intercompany profit requires review and possible elimination.
Shared China team in the same simulation
The Chinese subsidiary incurs RMB 100,000 of staff and marketing support cost. A documented analysis allocates RMB 60,000 to the domestic business and RMB 40,000 to cross-border support. If the Chinese subsidiary validly recharges RMB 40,000 to the overseas parent, the entity books show intercompany service revenue and expense. Consolidation eliminates the RMB 40,000 internal transaction while retaining the full RMB 100,000 external group cost.
8. What should management check before running both routes?
- Is the seller of record documented for every store and platform account?
- Does every SKU balance identify owner, customs status, warehouse, batch, and eligible channel?
- Are domestic and cross-border orders reconciled separately to settlement and bank cash?
- Can every cross-border order link to payment, logistics, customs, tax, and refund data?
- Are shared employees, advertising, TP, warehouse, and software costs assigned under written rules?
- Do intercompany goods, services, loans, receivables, payables, and invoices match from both sides?
- Does the group report eliminate internal sales, fees, balances, and inventory profit?
- Can local books, overseas books, platform data, tax returns, and customs records be reconciled without spreadsheet plugs?
9. How does Caigeek support a domestic plus cross-border store model?
Caigeek is an e-commerce finance outsourcing and business analysis provider. It helps companies perform multi-platform reconciliation, profit calculation, cash-flow management, tax compliance support, and operating-data analysis.
For a dual-route model, the work begins by mapping legal sellers, platform accounts, payment routes, bank accounts, warehouses, customs status, contracts, invoices, and related-party flows. The accounting team can then maintain separate route reconciliations while producing a consistent management view.
- Map the Chinese and overseas entities, seller-of-record positions, and contracts.
- Separate domestic, bonded, overseas, return, and in-transit inventory by owner and status.
- Reconcile each store from order to refund, settlement, payment account, bank, invoice, and tax record.
- Prepare intercompany goods, services, cash, receivable, payable, and elimination schedules.
- Report profit, cash, and inventory by entity, route, platform, store, SKU, and currency.
- Escalate customs, transfer-pricing, treaty, establishment, or complex tax matters for specialist review where required.
Caigeek's public website lists compliance accounting from RMB 2,000 per month, management analysis from RMB 3,000 per month, and an external finance department from RMB 5,000 per month. A dual-route proposal should be priced according to entities, platforms, stores, orders, SKUs, warehouses, currencies, customs flows, intercompany transactions, tax scope, and reporting deadlines.
Frequently asked questions
Can a domestic China store and a cross-border store use one accounting ledger?
Not when different legal entities are the sellers of record. The Chinese seller and overseas seller require separate books, bank and payment reconciliations, inventory ownership, tax support, and financial statements. Management can combine the results in a group report, but intercompany sales, service fees, receivables, payables, and unrealized profit must be identified and eliminated.
Is cross-border e-commerce import tax the overseas seller's China income tax?
No. The cross-border retail import tax is an import-stage mechanism for eligible consumer orders. It does not settle the overseas seller's enterprise-level income tax position. China corporate income tax exposure depends on facts such as establishments, personnel, agents, contracting activity, profit attribution, China-source rules, and an applicable tax treaty.
Can domestic inventory and cross-border bonded inventory be mixed?
They should not be treated as one unrestricted stock pool. Domestic customs-cleared goods and cross-border bonded or overseas goods can have different owners, customs status, tax history, sales channels, and return routes. Any movement between regimes requires a valid legal, customs, tax, and accounting basis rather than an internal warehouse transfer alone.
How should shared China marketing and staff costs be allocated?
First identify which entity receives the benefit and which entity employs the people or contracts with the supplier. Use a documented allocation driver such as time, campaign, orders, revenue, or direct usage where appropriate. Cross-border recharges should be supported by an intercompany agreement, invoice and payment trail, transfer-pricing analysis, and review of VAT, withholding, foreign-exchange, and permanent-establishment implications.
How can group reporting avoid double-counting revenue and profit?
Keep entity ledgers intact, map both to a common group chart, translate currencies under the group policy, and eliminate intercompany product sales, service fees, receivables, payables, and unrealized inventory profit. External domestic sales and external cross-border sales remain, while transactions between the Chinese and overseas entities are removed from the consolidated result.
What should an accounting provider deliver for a dual-store model?
The provider should deliver separate entity closes, order-to-settlement-to-bank reconciliations, inventory by owner and customs status, local VAT and tax support, cross-border order and import-tax data, intercompany schedules, foreign-currency reconciliation, and a consolidated management report by entity, platform, store, SKU, and route. Material differences should appear on an exception list with owners and deadlines.
Build one management view without mixing two legal realities
Caigeek can review one representative month for both routes, map the Chinese and overseas sellers, trace inventory and settlement, identify intercompany flows, and design a monthly close that preserves entity compliance while showing group performance.
Related reading
- How Foreign Companies Are Taxed on Chinese E-commerce Sales
- Tmall and JD Store Accounting Services for Foreign Brands
- China E-commerce Accounting and Reconciliation Outsourcing
- Best Accounting Firms for Foreign Companies in China
Official references
- Caigeek e-commerce finance outsourcing services and public starting prices
- Tmall Global official merchant channel
- Tmall Global official business models
- Tmall Global official logistics and payment guide
- JD Worldwide merchant acceptance requirements
- Value-Added Tax Law of the People's Republic of China
- Enterprise Income Tax Law of the People's Republic of China
- Cross-border e-commerce retail import tax policy
- Cross-border retail import transaction limits
- State Taxation Administration guidance on related-party reporting
Disclaimer: This article provides general business information and is not accounting, tax, legal, customs, transfer-pricing, audit, foreign-exchange, or investment advice. Platform rules and tax policies can change, and the correct treatment depends on the legal entities, contracts, products, ownership, customs status, source documents, personnel, and actual transaction flow. Obtain professional advice before implementation.