Shein UK faces explosive accusations of transferring vast bulk of income to its Singaporean parent company to slash its British tax bill, despite generating £2bn in sales from UK customers last year. The fast-fashion giant paid just £9.6m in corporation tax while campaigners claim 84% of revenue flows to Singapore.
The company stands accused of employing sophisticated financial maneuvers that echo tactics adopted by tech giants Amazon, Apple, and Microsoft over the previous decades. Paul Monaghan, chief executive of the Fair Tax Foundation, warns this represents a “new wild west” for tax avoidance in the fast-fashion industry. The strategy involves transferring approximately £1.72bn of the total sales figure to Roadget Business Pte Ltd in Singapore as a “purchasing cost”, leaving very little surplus left in the UK to be subject to corporate income tax.
Shein Distribution UK Ltd generates substantial economic value from UK sales, yet questions are being asked about how much profit is actually being booked as profit in the UK versus being booked in the tax haven that is Singapore. The UK accounts reveal substantial related party transactions with its immediate parent in Singapore, which transfer the vast bulk of income back to Singapore as purchasing costs.
Singapore operates a lower headline corporate income tax rate than the UK at 17% versus 25%, but also offers special incentives to attract corporates to establish operations there. These incentives mean profits can be taxed at rates as low as 5%, and previous Shein disclosures show Roadget Business Pte Ltd avails itself of these benefits. Accounts for the Singapore operation reveal it paid tax at an average rate of just 9.4% over three years from 2021 to the end of 2023, according to the Fair Tax Foundation.
The ultimate owner of Shein’s Singapore business is based in the Cayman Islands, another tax haven. This creates a complex corporate structure that spans multiple jurisdictions, each offering different tax advantages. The payment equivalent to 25% of £38.2m in pre-tax profits made in the UK in 2024 aligns with standard corporation tax rates, but campaigners argue the bill appears low relative to the massive sales volumes.
A spokesperson for Shein dismissed the allegations as “preposterously wrong” and claims they “collapse under the most basic scrutiny”. The company insists its practices represent standard international commerce where the UK business purchases products for resale from its principal at prices consistent with prevailing market conditions and arm’s length principles, just as any independent third party would. This approach ensures that transactions are fair, reasonable, and in line with global practices that are fundamental and widely accepted in global commerce.
The spokesperson emphasized that Shein operates in a low-margin, high-volume industry, which should be obvious to anyone who has done even minimal research on the sector. The company maintains it complies with relevant laws and regulations in each market it operates in and pays all relevant taxes in the UK where applicable.
Concerns about Shein’s low rate of corporation tax payments in the UK add to existing worries about its use of the de minimis rule. This regulation allows overseas sellers to send goods valued at £135 or less direct to British shoppers without paying any customs duty. Monaghan estimates that Shein would have paid as much as £200m in customs duty on importing its goods to the UK if it had not used this tax break.
Chancellor Rachel Reeves is currently reviewing the rule amid mounting fears that China’s retailers and manufacturers are dumping goods in the UK. The US in May revoked its own de minimis exception for Chinese-made goods, under which parcels with a value of less than $800 (£600) shipped to individuals were exempt from import tax. This week, the US also scrapped the tax break for items from all countries.
The EU announced in February it would phase out its exemption on customs duties for low-value parcels. It emerged this week that £3bn worth of these parcels from China made up 51% of all small parcels shipped to the UK from around the world last year. This figure was up from 35% in 2023-24, according to HM Revenue and Customs figures obtained by the BBC via a freedom of information request.
The data reveals the scale of the challenge facing UK authorities as they grapple with the rapid growth of direct-to-consumer shipments from Chinese retailers. These accounts filed at Companies House provide unprecedented insight into how major international retailers structure their operations to minimize tax obligations while maximizing market penetration.
The controversy comes as Shein had been considering a £50bn float on the London Stock Exchange but is now expected to list in Hong Kong instead. This shift reflects broader concerns about regulatory scrutiny and public perception in Western markets. The company’s business model, which has disrupted traditional retail through ultra-fast fashion cycles and direct-from-manufacturer pricing, continues to face questions about sustainability and tax responsibility.
The accusations highlight broader challenges facing tax authorities worldwide as digital commerce reshapes traditional retail models. The heavy criticism that met similar strategies a decade ago suggests regulatory pressure will likely intensify, particularly as governments seek to protect domestic tax bases while supporting local retailers who cannot access similar offshore structures.