On October 14, the State Administration of Taxation issued measures for the due diligence of tax-related Information on non-resident Financial accounts (hereinafter referred to as the "measures for Administration"), seeking public opinions from the public, as of October 28. High-profile disclosure of offshore accounts and exchange of information on financial accounts surfaced.
On January 1, the State Administration of Taxation opened and checked offshore accounts, marked high and low 6 million lines, and issued the measures for compensation and punishment. Rational planning of identity, allocation of wealth, has become a must face the problem, urgent!
Before the introduction of the Management approach, we need to understand this background:
On December 17, 2015, China's government signed the multilateral government-to-government Agreement for automatic Exchange of tax-related Information in Financial accounts (also known as the multilateral automatic Intelligence Exchange Agreement).
There is no doubt that the proposed approach to the multilateral automatic Exchange of Information Agreement to improve and supplement.
Tremble-your wealth will be transparent!
In accordance with the due diligence schedule of the Management measures, due diligence on newly opened individual and institutional accounts will commence on 1 January 2017;
By 31 December 2017, complete due diligence on high net worth accounts of stock individuals (with a total financial account balance of more than 6 million yuan as at 31 December 2016);
By December 31, 2018, complete due diligence on low net worth accounts of stock individuals and all institutional accounts in stock.
At that time, the property of domestic non-residents will be completely exposed to the state tax authorities.
And for the people who have signed foreign property, should also be careful!
China's first exchange of tax-related information on non-resident financial accounts is September 2018. Correspondingly, countries and regions that have joined the information exchange system will also report overseas financial information concerning Chinese tax residents to China in September 2018, that is, Information on Chinese tax residents' overseas accounts will also be communicated to the State Administration of Taxation in the country where the account is located.
Still want to go to tax havens?-it's too late!
In the past, one of the most common tax-saving ways for high net worth customers with overseas income was to open an offshore account directly to hold assets. However, this kind of operation is about to be broken!
In September 2017, information on bank accounts opened by Chinese individuals and their controlled companies in 56 countries (as of the end of 2016) will be reported to the tax authorities of China on their own initiative. Many investors are familiar with offshore locations as well as European countries and regions: Bermuda, British Virgin Islands, BVI, Cayman Islands, Seychelles, Cyprus, Luxembourg, United Kingdom, France, Germany, Italy, Netherlands, etc.
In September 2018, information on bank accounts opened by Chinese individuals and their controlled companies in 40 countries (as of the end of 2017) will be reported voluntarily to tax authorities in China, including Australia and Canada. Hong Kong, Macau, Indonesia, Malaysia, Japan, Macau, New Zealand, Singapore, Switzerland, etc.
It's been taxed all over the world. Where else do you want to run?
Information will be "tax besieged"-too detailed!
You should know that the Administration measures are aimed at the deliberate evasion of taxes by non-tax residents, and this is the purpose of exchanging information on opening financial accounts in non-resident countries to the taxable Republic of China.
According to the presentation of the draft for comments, the following non-tax residents will be submitted to the General Administration of Taxation:
(1) the name and current address of the individual account holder, the country of tax resident (region), the taxpayer identification number of the resident country (region), the place of birth and the date of birth; The name and address of the holder of the institutional account, the tax resident country (region), and the taxpayer identification number of the resident country (region); If the holder of an institutional account is a negative non-financial institution with a non-resident controller, it shall also submit the name of the non-resident controller, his current residence address, the country of tax resident (region), the taxpayer identification number of the resident country (region), and the place of birth, Date of birth;
(2) account number or similar information;
(3) to disclose the balance or net value of a single non-resident account at the end of the year (including the cash value or withdrawal value of an insurance contract or annuity contract with cash value). If the account is written off during the current year, no such information is required, but it should be noted that the account has been cancelled.
(4) A deposit account shall report the total amount of interest received or credited to the account during the calendar year.
(5) A escrow account shall report the total amount of interest received or credited to the account during the calendar year, the total dividend and other total income received or credited to the account as a result of the assets under trust. Where the financial institution submitting the information is an agent, intermediary or nominal holder, it submits the total revenue received or credited to the escrow account as a result of the sale or redemption of the financial assets.
(6) other accounts shall report the total income received or credited to the account during the calendar year, including the total amount of redemption payments.
(7) other information requested by the State Administration of Taxation.
What will happen if you don't declare it?-the legal consequences cannot be tolerated!
Multilateral exchange of tax information will automatically enable Chinese tax authorities to obtain offshore account information with Chinese individuals. Individuals in China who have not declared their offshore proceeds may face the following administrative and criminal responsibilities:
Administrative responsibility If the income of Chinese tax residents abroad has not been reported to the Chinese tax authorities and therefore has not been paid in China, according to the provisions of the current tax collection and administration law, this is called "tax evasion." A fine of more than 50% and less than five times the undeclared amount shall be paid, and an annual late payment of about 18% shall be payable in respect of the undeclared amount. Moreover, these obligations are not limited in the period of recourse, that is, tax authorities can recover at any time. The tax collection law is currently being revised, with administrative penalties and late-payment amounts likely to be subject to different rules, but are unlikely to be abolished.
Criminal liability According to Amendment No. 7 of the Criminal Law, if a taxpayer adopts deceit, conceals means of making false tax returns or does not declare tax, and evades paying a large amount of tax and accounts for more than 10% of the amount of tax payable, it will constitute a crime of evading paying tax. In spite of the provision that "after the notice of recovery issued by the tax authority according to law, the payment of the tax payable and the payment of the late payment fee have been subject to administrative punishment, the criminal liability shall not be investigated", and its application is also conditional.
The above-mentioned agreement and the United States FATCA agreement complement each other, will form a huge tax intelligence network. Virtually all offshore account information will be exposed to sunlight, and common tax-saving measures may fail.
Is immigration a good option?-it's a little useful in the short term!
Some guests will say, since the global tax is so harsh, then I can emigrate to a non-global tax country, such as Singapore. There is only one question. Will your future assets and life be transferred to Singapore?
Let's take a look at China's definition of tax residents.
A resident taxpayer in China refers to a person who has a domicile in China or has no domicile but has resided in China for a period of more than one year (365 days). Temporary departure (not more than 30 days in a tax year or more than 90 days accumulated at a time in a tax year) is not deducted from the number of days.
A non-resident taxpayer refers to an individual who has no residence or residence in China, or who does not live in China for less than one year. According to the provisions of the tax law, resident taxpayers are required to pay taxes on all their income inside and outside China, and non-resident taxpayers only pay taxes on income within China.
So, if you rent a house in China and live for less than a year after emigration, is it even a non-resident? The answer is no. China's government's recognition of tax residents is much broader than the definition seems. According to Article 2 of the regulations of the people's Republic of China on the implementation of the personal income tax Law, an individual who has a domicile in China refers to a person habitually residing in China due to the relationship of household registration, family and economic interests.
Habitual residence is a legal criterion for determining whether a taxpayer is a resident or a non-resident. It is not a de facto residence or residence for a particular period of time. It is usually understood as a taxpayer who studies, works, and works. The place to be returned after the removal of reasons such as family visits.
For immigrants, as long as your family, production and business activities or major property are located in China, after the elimination of reasons such as study, work, family visit and so on, it is decided that you will eventually return to life in China, whether or not you own a real estate in China. Will be judged as tax-paying residents of China, subject to China's global tax system.
Second, 51 countries and regions have signed the agreement, including Germany, the United Kingdom and other developed EU countries, but also Argentina, South Korea, Singapore and South Africa from different countries from other continents. And the United States has already implemented the overseas account tax Compliance Act (FATCA), which requires all financial institutions outside the United States to submit account information to specific US account holders. Otherwise, a 30% punitive advance tax would be levied on the financial institutions' income from the United States. So the hope of immigration to achieve tax avoidance of wealth transmission is not a small difficulty.
Does that mean there's no way to avoid taxes?
In fact, there are many ways to avoid taxes reasonably, such as family trusts, such as high life insurance. Based on the multilateral agreements already signed by many countries, including China, the most secure allocation is in the countries that have not signed the agreements.
trust
A simple investment person may not need a family trust, because the assets are relatively single. But if their assets are diversified and many are not directly assessable in external markets, such as corporate equity, these assets face legal and tax unknowable costs in some future transactions. The advantage of the family trust is that when the family trust is established, the trust asset belongs to the trust itself, not the principal, so it has the excellent function of asset isolation.
Big life insurance
Of course, we can also make use of the large amount of life insurance indemnity tax-free characteristics, the overseas large life insurance policy into the family trust, the combination of the two to further enhance the space of reasonable tax saving. Article 5 of the inheritance tax (draft) formulated earlier in our country stipulates that the insurance money obtained by the insured person for life insurance shall not be counted into the total taxable estate. Generally speaking, the compensation of large amount of life insurance belongs to the category of tax exemption in the tax laws (including China) all over the world, which also has the effect of tax optimization. In addition, overseas large-scale life insurance has flexible financing arrangements and can be combined with trusts. Its flexibility and functionality are very suitable for overseas wealth structure arrangements.
We can use a case study to illustrate how the above architectures are grouped together:
A Chinese father has set up an overseas family trust for the benefit of father, mother and son. Overseas trusts hold and manage the wealth management products that Dad puts into the trust. Life insurance policies can be used to isolate debts and optimize tax costs. So we used some of the assets held in our father's overseas trust to buy large life insurance policies (dad is the insured, trust is the beneficiary of the policy, and mother and son are the beneficiaries of the trust), and at the same time, The trust mortgaged the policy, obtained financing and invested it. The son emigrates and lives in Hong Kong, and the trust allocates most of the investment income to his son.
In the era of global taxation, reasonable tax saving and asset preservation is an urgent problem. With the help of life insurance and procrastination reasonable tax evasion is the best choice for the rich!