China hunts overseas tax cheats

Source:Global Times Published: 2018/9/4 20:58:41

Residents targeted for undeclared foreign incomes

Chinese tax authorities have begun hunting tax-evading residents with undeclared overseas incomes and assets by exchanging information with foreign tax authorities under the Common Reporting Standards (CRS) initiative of the Organization for Economic Co-operation and Development (OECD).

Starting Saturday, the State Administration of Taxation began gathering and exchanging financial intelligence about individual overseas incomes with other countries and regions, according to a CRS schedule published on its official website.

"This is a fundamental step for China to strengthen tax supervision," Zhu Daqi, a professor of tax law at Renmin University of China in Beijing, told the Global Times.

Similar domestic measures had already been implemented, Zhu said, with "related departments" assisting Chinese tax authorities in gathering information about taxpayers' individual incomes.

Information exchanged between countries and regions includes account type, name, fund amounts, tax residency and asset type: deposit account, cash value insurance contracts or stakes in financial institutions.

Offshore financial tools must also be legally declared.

If information is incorrectly disclosed or not disclosed, then assets could be frozen. In serious violations, individuals may also face a potential fine or lawsuit, the website said.

The new rules bolster China's General Anti-Avoidance Rule (GAAR) and its new personal income tax law, further empowering Chinese tax authorities to crack down on tax evasion.

China's top legislature on Friday approved the new Individual Income Tax Law at the end of a five-day bimonthly session of the National People's Congress Standing Committee.

The new law comes into force on January 1 while clauses boosting the minimum threshold for personal income tax exemption go into force on October 1.

The overseas information exchange is a fundamental preparatory step for the new personal income tax law, according to Zhu. "The new law, which will take effect next year, has introduced GAAR for individuals rather than just focusing on corporations." 


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