Starting this month, for the first time, China exchanged CRS (Common reporting guidelines for overseas Financial accounts) information with some other countries, and China's tax authorities will have control over individual overseas income once it is classified as a high-risk taxpayer. In the face of huge funding sources of unknown review, but also to pay a large amount of personal income tax.
In addition, the revised personal income tax law for the first time to establish anti-tax avoidance provisions, will give China's tax authorities a strong law basis.
In short, the official opening of China's crackdown on international tax avoidance nets will leave hidden tycoons nowhere to hide.
CRS anti-tax avoidance provisions, overseas tax evasion rich people tremble
Starting this month (September 2018), the State Administration of Taxation will exchange information with several national tax authorities for the first time, according to the official website of the State Administration of Taxation.
This kind of information exchange is "financial account tax-related information automatic exchange". One of these is an important agreement, called the Common reporting Standard (Common Reporting Standard), which is referred to as CRS.. To put it simply, it is the standard of mutual assistance and cooperation of government among countries to inform each other of citizen property information in their own country, so as to jointly combat taxpayers' tax evasion and money laundering by using the opacity of transnational information.
As early as September 2017, "tax havens" such as Bermuda, the British Virgin Islands, the Cayman Islands and Luxembourg have exchanged information for the first time, according to public information. As of August 7, 2018, 103 countries (territories) have signed the Agreement between multilateral competent authorities for the automatic Exchange of tax-related Information in Financial accounts.
In China, according to previous plans, mainland China, Hong Kong and Macao completed their first exchange of information with other CRS participants in September, including Singapore, Bahamas and Bahrain. A total of 47 countries and regions.
This means that the Chinese tax authorities can easily understand and grasp the income information of Chinese tax residents overseas assets in this way.
The information exchanged includes, inter alia, the following three main areas:
It is worth mentioning that recently, the closely watched personal income tax law was passed by the standing Committee of the National people's Congress (NPC) and will be implemented on January 1, with the introduction of the anti-tax avoidance clause for the first time, which also means strengthening the collection and management of high net worth people. According to the revised tax Law published by China's National people's Congress Network, the new anti-tax avoidance clause is the eighth article:
CRS's continued push to enforce anti-tax avoidance provisions in the new tax code, keen to open accounts in "tax havens", secretly hide money rich people, or involved in money laundering, tax evasion, any irregularities will be marijuana annoyance.
A large number of Chinese accounts in Australia and New Zealand have been closed
Foreign media released big news more than a month ago that thousands of accounts in New Zealand, Australia's largest commercial banks were frozen and asked to confirm whether the account was owned by foreign taxpayers, which also involved a large number of Chinese residents.
In fact, as early June, New Zealand media reported that New Zealand Bank would freeze your account if foreign tax information was not provided. Since July 1, has not been in accordance with bank regulations, the overseas arrears, all frozen accounts, no one can exception. Of course, the funds in the frozen account will remain in the account, but the customer cannot access it.
At present, Australia and New Zealand banks have frozen thousands of accounts, and the scope will continue to expand.
It is worth mentioning that China, Australia and New Zealand are on the list for the first exchange of information in September. Basic information about all non-Australian residents who open accounts in Australia, such as names, ID numbers, addresses, birthdays, account numbers, account balances and significant transactions that occur every year, as well as bank deposit accounts, escrow accounts, Insurance contracts and other information will be shared between the tax authorities of China and Australia.
$21 trillion in assets, "hidden" in 11 tax havens
For a long time, many rich people quietly transferred their huge assets abroad. What they like is so-called tax havens, such as Bahamas, Cayman Islands, Virgin Islands, Luxembourg, Switzerland.
To attract foreign capital inflows and to prosper their own economies, these countries (regions), known as tax havens, have something in common:
- Only a very small annual management fee shall be charged for the establishment of a company which comes to be registered for registration;
- Keep the information of shareholders, share ratio, income status and so on highly confidential;
- No taxation or extremely low tax burden;
- No foreign exchange control;
- Regulation is loose.
At the same time, companies set up in these countries are recognized by almost all major international banks to open accounts with banks.
The tax havens are estimated to have more than $21 trillion in assets, most of which are outside the jurisdiction of tax officials.
The situation is grim, the introduction of the CRS, but also to combat such overseas accounts tax avoidance issues. One might say that it would be nice to transfer assets to non-CRS members. It is understood that those who have not signed for the time being do not mean that they will not sign at any time. Now that there is a standard for information exchange, as long as an agreement is signed, the information can be exchanged at any time.
Which countries are currently signatories to the CRS?
More than 100 countries around the world have pledged to implement the first financial account information exchange under CRS by September 2018.
At present, China has joined the multilateral tax Collection and Administration Convention (MCAA) and implemented pairing. According to data published by the OECD, China has been "paired" with more than 60 countries and regions under the MCAA. Automatic exchange of information is officially "activated." in more than 60 countries, there is no shortage of "tax havens" such as the British Virgin Islands, Cayman and Bermuda.
What exchange of information is involved?
Overseas institutional accounts: deposit institutions, depositaries, investment institutions, specific insurance companies and other financial institutions.
Asset information: deposit accounts, escrow accounts, cash value insurance contracts, annuity contracts, equity / bond yields held by financial institutions.
Account contents: account and account balance, name and date of birth, tax residence, annual payment to or accounting for the total amount of the account.
Who will be affected by CRS?
1) Chinese who have emigrated
2) people who have financial assets overseas
3) overseas investment and financial management of shell companies
4) domestic civil servants who collect money abroad
5) people who buy large amounts of life insurance overseas
6) people who set up family trusts abroad
7) owners of foreign companies engaged in international trade
8) employees of financial wealth institutions