On the evening of May 15, New Distribution's internal community organized an online sharing session titled 'Coping Strategies for Community Group Buying in a Compliance Environment.' We invited Li Xinhao, a partner of New Distribution Consulting and a tax and financial expert, to share in the community e-commerce CEO group, with simultaneous live streaming to other internal groups.

The editor believes that in today's changing business environment, especially as the state increasingly emphasizes corporate and tax compliance, bosses who don't understand tax and finance may really suffer significant losses. Particularly for individual bosses in the FMCG industry, who have often neglected tax and financial matters in the past, the editor suggests that the following content is truly worth careful study. As the sharing lasted one hour and the transcript exceeded 10,000 characters, we have organized it into three articles to be pushed this week. This is the first article, focusing on the impact of compliance environment changes on enterprises.

Today's topic is corporate compliance, but the core is actually tax and financial compliance. Most of you in the group are operators and experts in the community group buying field. When it comes to tax and financial matters, you might think it's the accountant's job, not something the boss should worry about. If we go back a few years, that thinking was understandable. But in recent years, especially since this year, the entire business environment has changed significantly. A boss who doesn't understand tax and finance is like someone who didn't understand the internet a few years ago. Your business might not be affected much now, but in reality, it's gradually becoming unsuitable for the changing environment. This is somewhat like Zeng Ming's 'three waves converging' concept. You might think you're on the first wave and life is good, but the second and third waves have already arrived. You just haven't realized it, or you've just realized it but aren't prepared to respond.

As mentioned, the business environment has changed significantly. From the perspective of tax and financial compliance, this is mainly reflected in industry regulation, tax regulation, social security regulation (which now also falls under tax), and financial regulation.

First, let's look at industry regulation.

Why discuss industry regulation in tax and financial compliance? It's the foundation, determining the basic rules and boundaries for running a business. Everyone in the group is in the community group buying field, which I understand falls under social e-commerce. Regarding industry regulation, two main things are relevant: the E-commerce Law and the Social E-commerce Management Standards. These two are largely similar. The E-commerce Law has been implemented this year and has detailed provisions. Since you're all industry experts, I won't show off, but I'll only touch on a few key points related to tax and finance:

One is the requirement for subject registration, meaning you need a business license, whether as a company or an individual business. Someone might ask, 'Do I have to register to open a WeChat store?' The E-commerce Law specifies a few exceptions, only for small, sporadic cases.

Second, it emphasizes tax obligations. Whether you're a company or an individual business, you must pay taxes. Even if you don't need a business license, if a tax obligation arises, you must pay. What is a tax obligation? Someone might say, 'I pay tax when I issue an invoice; if I don't issue an invoice, I don't owe tax.' That's wrong. You owe tax when you issue an invoice, when you make a profit, when you sign a contract, and when you receive investment funds. These all constitute tax obligations.

Third, and most importantly, it specifically requires platforms to keep transaction records, with complete records and preservation of transaction information for three years. Someone might say, 'What's there to note? Internet systems can save transaction records anyway; we need them for our own reference.' But note: if you can check them, so can the tax authorities. Think about it: all your transactions and amounts received are on the platform. Now, how many invoices have you issued? Do they match? Someone might say, 'I won't put transaction records on the platform, so they can't be found.' You're right. If you can use the platform but not save records, I can only say: you're capable if you can get the platform to agree, or your platform is capable if it doesn't save records. But that's not the end of it. Even if you don't transact on the platform, the risk is reduced but not eliminated. We'll discuss that later.

To summarize, three key things: first, you need a license; second, you must pay taxes; third, your transaction records must be kept for inspection.

Compliance regulation, in fact, focuses on tax regulation.

When it comes to tax regulation, we must mention the Golden Tax Phase III system. Today, we'll mainly discuss two key points relevant to you: changes in VAT invoice management and changes in tax audits.

A notable feature of Golden Tax Phase III is the significant strengthening of VAT invoice management, which can be described as a qualitative change. How so? Under Golden Tax Phase III, if you're a trading company, the system can automatically compare whether your 'input' and 'output' match. For example, if you sell beer but your input is fertilizer, there's definitely a problem. In such cases, buying invoices is basically unrealistic. You might have experienced this. Of course, there are still those who buy invoices and haven't been caught, but the risk is increasing. Moreover, if one company that bought invoices has a problem, it's like pulling up a radish and bringing out mud—tracing upstream to the seller, all companies that bought invoices from that seller will be implicated.

Another major change this year is in audits. Previously, most tax audits came from reports. Now, if the risk control system detects anomalies through indicator monitoring, it will require the company to conduct a self-inspection. At this point, it depends on the accountant's level and responsibility. If they're competent and conscientious, it's usually okay, at most paying back taxes. If handled improperly, it could be very troublesome. So, as a side note, under the current situation, bosses should treat their accountants well. A responsible, learning-oriented financial person can solve big problems for the boss at critical moments.

Social security regulation is now also under tax. The biggest impact is mainly on the contribution base. From a tax perspective, the contribution base should be consistent with the wage base. That means the past practice of paying social security based on the minimum contribution base is no longer feasible. For companies, the most direct impact is a significant rise in labor costs. Although the rate has decreased, the overall proportion is still high, and the burden remains considerable. Looking at implementation across regions, Beijing and Shenzhen have started, but many second- and third-tier cities haven't yet. In the long run, social security compliance is an inevitable trend. We're currently in a transitional phase, and some time should be given. On one hand, regions will implement specific measures based on actual conditions; on the other hand, it gives companies time to respond and prepare.

In finance, the most direct impact on companies is bank fund supervision.

In fact, in recent years, banks have been more active in fund supervision than tax authorities. Since 2016, when the central bank issued the management measures for large-value and suspicious transactions, the scope of fund supervision has expanded. For example, for large-value transactions, previously 200,000 yuan per day was considered large; now 50,000 yuan per day is large. What's the purpose? The central bank has an anti-money laundering center, and all commercial banks must report large-value transactions to it. In other words, personal cash withdrawals of 50,000 yuan must be reported. Of course, it's just a report; it doesn't mean anything. If you need to withdraw hundreds of thousands, you still can. It just shows that national financial supervision has become this strict. Another example is suspicious transactions. Many previously common practices like large transfers, large cash withdrawals, and payments to private accounts now often trigger bank calls asking what the money is for or where it came from. This is actually system-monitored risk that local branches must report. Another example: previously, registering a company usually didn't require the legal representative to be present, or at most for tax purposes. Now many banks require the legal representative to be present for on-site signing, and even the financial officer. Additionally, banks will conduct on-site inspections of the company's registered address to verify it exists. These requirements are concrete measures by financial institutions to strengthen bank account opening management.

What's the impact on us? Some of you might have private accounts for receiving money. That is, because customers don't need invoices, income goes directly into the boss's personal account. Currently, supervision isn't thorough enough to catch everything, so continuing this practice might not be discovered yet. But under the current regulatory environment, on one hand, the likelihood of being noticed for receiving money is increasing—if the amount is too large or there's a pattern, the risk of discovery rises. On the other hand, how the money flows after entering is also a problem. Last year, there were many forwarded messages about CRS, saying banks conduct due diligence on accounts over 6 million yuan, and so on. In fact, CRS is about tax information exchange, mainly affecting those with overseas assets. Many people don't need to panic, but it reflects a fact: bank accounts are actually controlled by banks; it's just a matter of whether they choose to investigate you.

To respond to regulation, first understand how regulators view us. Regulators, including the Ministry of Industry and Information Technology, the Ministry of Commerce, the Administration for Industry and Commerce, tax authorities, and banks, view a market entity more from the perspective of its business activities in the market, reflecting an external viewpoint. That is, what is the nature of your business entity, what related entities are associated with you, and what are the relationships? What entities do you transact with, what are your transactions like, where does your income come from, have you paid taxes, does it comply with laws and regulations, and are there any illegal or non-compliant behaviors? This manifestation I call the business architecture, including organizational structure, transaction structure, equity structure, and profit model. Business architecture is a big topic; we won't expand on it today. We'll focus on how regulators view the community group buying industry and how we should understand it.

Next episode preview (updated tomorrow): How do regulators view community group buying?

Tips will be paid 400-2000 yuan once adopted.

China FMCG + Internet Professional New Media Dedicated to FMCG manufacturers' transformation and upgrade and channel digital solutions